- Third quarter miss and full year warning sends stock tumbling 25%
- Orthodontics demand has dried up as household budgets tighten
- Implied $3.83 billion 2023 revenue equates to 3.5% miss against consensus
Orthodontics probably sounds like a boring field but there will be fireworks when Align Technology (ALGN:NASDAQ) starts trading on Wall Street later today. Pre-market data has the stock collapsing 25% to 2023 lows of around $189, enough to wipe the smile off anyones face.
Warning that you fell short of forecasts and that near-term projections are too high will do that, even if Align’s rough 6% and 4% earnings and revenue miss may not appear that savage.
Overnight, the Arizona-based orthodontics technology business told investors that third quarter (to 30 Sep) earnings and revenues came in at $2.14 per share and $960.2 million, below analyst consensus estimates pitched at $2.27 per share and $998.7 million respectively.
‘Our third quarter results reflect lower than expected demand and a more difficult macro environment than we experienced in the first half of 2023’, chief executive Joe Hogan told investors. ‘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’, he said.
LONG-RUN GAIN BUT SHORT-TERM PAIN
Nobody seems to be questioning Align’s long-run opportunity here. After all, modern world people are increasingly looking to technology for cosmetic enhancements, providing a structural driver for Align’s technology.
This is not about dental supplies, the core of Align’s business is its Invisalign transparent teeth straightener, which helps people improve their smiles more fashionably and more comfortably than traditional straightening solutions, like braces.
But crucially, the dip in demand looks set to last through the rest of 2023, which will put pressure on 2023 and possibly 2024 growth hopes. Align now anticipates fourth quarter revenue in a range of $920 million to $940 million, below the consensus estimate of $1.02 billion, dragging on full year 2023 analyst projections that had stood at $3.97 billion. They are more likely to be in the $3.83 billion to $3.85 billion range, about a 3.5% miss at the low point.
