Why Align Technology Shares Popped
Jan 31st 2013 1:18PM
Updated Jan 31st 2013 2:25PM
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Align Technology -- maker of the Invisalign dental aligner, as well as various CAD/CAM software -- jumped as much as 12% after reporting better-than-expected fourth-quarter results.
So what: On the heels of strong sales of Invisalign, Align reported an 11% increase in year-over-year sales to $142.8 million, and an adjusted profit of $0.27. Both figures sailed past Wall Street's expectations, which had called for $134.7 million in sales and only $0.22 in EPS. Looking toward the first-quarter, Align is forecasting that it'll sell 95,000 to 97,500 Invisalign cases and will earn $0.21-$0.23 on $146 million to $150 million in revenue. Compared to the current consensus estimate, Align's sales forecast is ahead by more than $1 million on the low end, however, it fell well short of the $0.26 in expected EPS.
Now what: Having worked in the dental industry previously (albeit a long time ago), I can tell you how fickle the spending habits of consumers can be if the economy isn't booming. Consumers will simply put off cosmetic dental work, including something as simple as a clear dental aligner, until their financial situation improves. A removal of the payroll tax holiday and a negative fourth-quarter GDP are enough reason for me to remain skeptical about the health of the dental lab sector and its suppliers like Align Technology for the time being.
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