Analyst Note| Soo Romanoff |
No-moat Align Technology reported another very strong quarter, with revenue of $834 million, a 28% increase from the prior year with record liner and iTero scanners sales and impressive international growth. Top-line growth continues to be boosted by investments in virtual and digital training as well as notable promotional marketing to address the many people working from home with more time for self-care. These investments also targeted general practitioners (in addition to orthodontists) who are likely drawn by the potential to expand their scope of services along with revenue. Despite the upbeat discussion, we do not view these levels to be sustainable for the foreseeable future, as implied by the current share price. Further, high unemployment and economic softness could also prove to be a headwind for this elective procedure. We have increased our fair value estimate to $259 from $175 to reflect the robust near-term growth. However, this is significantly below the most recent closing price of $546 per share.