Align Looks Cheaper Than Ever Following Post-Earnings Selloff

Following Align Technology’s lackluster first-quarter results, we are lowering our fair value estimate to $512 per share from $606 after incorporating our expectations for higher operational expenses to reach management’s 20%-30% revenue growth targets over the longer term. Nonetheless, we think the market reaction that drove Align shares down 20% after the release was overblown. We remain confident in the firm’s narrow moat, which rests on switching costs that haven’t changed appreciably, in our view. Furthermore, with consumers growing more cautious about spending discretionary income in the current macroeconomic environment, a dip in case volume is not indicative of a weakening competitive position. The shares are attractively undervalued, from our perspective.