Should you buy or sell Align Technology shares amid a declining sales trend?

By: Motiur Rahman
Motiur Rahman
Md Motiur enjoys researching how companies are solving challenges the world will face over the coming decades. In his… read more.
on Oct 13, 2021
  • Align Technology shares on Wednesday plummeted more than 5% after Stifel highlighted the soft sales trend.
  • ALGN manufactures 3D digital scanners and the Invisalign clear aligners used in orthodontics.
  • The company’s Invisalign cases fell by 5% in Q3 compared to an increase of 14% in Q2, and 23% in Q1.

On Wednesday, Align Technology Inc. (NASDAQ:ALGN) shares declined by more than 5% after Stifel analyst Jonathan Block pointed to a declining sales trend in the company’s Invisalign cases.

Align manufactures 3D digital scanners and the Invisalign clear aligners used in orthodontics. And according to recent sales reports, its Invisalign cases for Q3 declined by 5%, compared to the 14% growth reported in Q2, and 23% increase in Q1.

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Stifel’s Block said that also the decelerating growth trend was expected, the decline was a surprise. Nonetheless, the analyst retained a buy rating on ALGN shares with a price target of $750 per share, implying an upside potential of more than 25% on Wednesday’s closing price.

Is Align’s growth still realistic?

From an investment perspective, Align Technology shares trade at a step P/E ratio of 71.50, making the stock less attractive to growth investors. However, analysts expect its earnings per share to skyrocket by 305% this year, before rising at an average annual rate of about 31.83% over the next five years.

Therefore, growth investors could find the stock exciting. However, given the company’s declining sales trend for the Invisalign cases, the current growth projections may be overstated 

Therefore, it may be best to monitor performance for the next few quarters before betting on ALGN’s growth prospects.

Source – TradingView

Technically, Align Technology shares seem to be trading within sharply descending channel formation in the intraday chart. As a result, the stock has plummeted to oversold conditions, creating an opportunity for a rebound.

Therefore investors could target short-term rebound profits at about $625.72, or higher at $655.33. On the other hand, $571.33 and $543.10 are crucial support zones.

ALGN seems poised for a rebound

In summary, although Align Technology’s long-term growth story may be put on hold until its sales growth spike again, Wednesday’s sharp decline creates an opportunity to bounce back.

Therefore, investors could buy the stock short-term ahead of a potential rebound.

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