Shares of Align Technology (ALGN 0.78%) were crashing 24.6% lower as of 11:34 a.m. ET on Thursday. The big sell-off came after the orthodontic medical device company announced its third-quarter results following the market close on Wednesday.
This drop continued a downward slide in Align's share price that began in September. Prior to that point, the healthcare stock had been sizzling hot with a year-to-date gain of nearly 75%.
NASDAQ: ALGN
Key Data Points
Why were Align Technology's Q3 results so disappointing?
Align reported Q3 revenue of $960.2 million, up 7.8% year over year. However, this result fell far short of the consensus Wall Street revenue estimate of $996.5 million.
The company posted Q3 net income of $121.4 million, or $1.58 per share, based on generally accepted accounting principles (GAAP). Its non-GAAP (adjusted) earnings came in at $164.3 million, or $2.14 per share. Although this adjusted number reflected a 31.3% year-over-year jump, it was well below the average analysts' earnings estimate of $2.27 per share.
There was even more bad news in addition to the Q3 revenue and earnings misses. Align cut its full-year 2023 revenue guidance to a range of $3.83 billion to $3.85 billion from its previous outlook of revenue between $3.97 billion and $3.99 billion. The company also said that it expects sales to fall sequentially in the fourth quarter due in large part to "a more challenging macroeconomic environment for doctors and patients with fewer orthodontic case starts overall."
Is Align Technology stock a buy on the pullback?
Align Technology CEO Joe Hogan said, "Dental practices and industry research firms have reported deteriorating trends, including decreased patient visits, and increased patient appointment cancellations, along with fewer orthodontic case starts overall, especially among adult patients." This seems to be a strong sign that consumers are reducing spending because of inflation, higher interest rates, and concerns about the overall economy.
With these headwinds, it's possible that Align Technology's share price could decline even more over the near term. However, the long-term demand for the company's clear aligners and intraoral scanners should be strong.
Investors could potentially buy Align at an even more attractive valuation if they wait a little. But I think that buying the stock now on the pullback is likely to pay off handsomely for those with a horizon of 10 years or more.
