Markets

Why Align Technology Stock Is Jumping Today

What happened

Shares of Align Technology (NASDAQ: ALGN) were 12.1% higher as of 11:16 a.m. EDT on Thursday. The nice gain came after the orthodontic device maker announced better-than-expected third-quarter results on Wednesday evening.

Align reported Q3 revenue of $607.3 million, a record for the company and well above the consensus Wall Street estimate of $594 million. It also announced earnings per share of $1.28, handily beating the average analysts' estimate of $1.14.

Hand holding clear dental aligner

Image source: Getty Images.

So what

Investors nearly always react positively when a company easily tops Wall Street estimates as Align did in the third quarter. But the company's Q3 results were even more encouraging in light of its cautious outlook provided just three months ago.

It expected headwinds in the Asia Pacific region because of "uncertainty in China." But the company didn't run into as many problems as it anticipated. Align reported all-time high revenue in the Asia Pacific region as well as in its Latin America region. CEO Joe Hogan said on the company's Q3 conference call that the teen market in China was especially strong. 

While Align has been heavily scrutinized because of worries about slowing growth rates, the company's third-quarter performance showed that it's still generating impressive top-line growth. It reported that sales increased 20.2% year over year, and it expects revenue growth anywhere from 20% to 22% for the fourth quarter.

Now what

China remains the key area to watch. Hogan acknowledged that the company still has "a headwind there," noting that China has reported "the slowest growth seen in 30 years." But he also said the company feels good about the momentum there.

Align is also spending heavily on marketing and promotion. As is the case for individuals investing in stocks, businesses must invest in their future not knowing for sure what their return will be. Although increasing marketing costs are weighing on earnings, they could pay off over the long run as consumers become more aware of the company's clear orthodontic aligners. 

10 stocks we like better than Align Technology
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has quadrupled the market.*

David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Align Technology wasn't one of them! That's right -- they think these 10 stocks are even better buys.

See the 10 stocks

 

*Stock Advisor returns as of June 1, 2019

 

Keith Speights owns shares of Align Technology. The Motley Fool owns shares of and recommends Align Technology. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

ALGN

Latest Markets Videos

The Motley Fool

Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

Learn More