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ALGN – Market expectations are for slight Uniform ROA expansion, but management may have concerns about their digital platform, Invisalign treatment, and margins

September 9, 2020

  • Align Technology, Inc. (ALGN:USA) currently trades above historical averages relative to UAFRS-based (Uniform) earnings, with a 70.5x Uniform P/E. At these levels, the market has bullish expectations for the firm, but management may have concerns about the potential of their digital platform, Invisalign treatment, and overall gross margins

  • Specifically, management may lack confidence in their ability to execute the ADAPT program, improve overall gross margins, and sustain increased revenue in countries with higher prices. They may also be overstating the potential of imaging in treatment planning, their digital platform, and new partnership with Charli D’ Amelio. Furthermore, they may lack confidence in the adoption of digital workflow around iTero scanners and general dentistry, and they may have concerns about the financial losses related to the exocad acquisition. Management may also have concerns about the sustainability of demand for Invisalign treatment, and the potential of their new and improved digital learning environment for their doctors