On Monday, Leerink Partners upgraded Align Technology (NASDAQ:ALGN) shares from Market Perform to Outperform and increased the price target to $280 from $235. The firm's analysts cited an improved outlook for the company, anticipating opportunities for growth due to positive consumer sentiment and other factors.
The upgrade is based on a higher target multiple of approximately 18 times the calendar year 2025 enterprise value to EBITDA, up from around 15 times.
"For what remains a clear market leader with a continually broadening moat, we see opportunities into 2025 for upside given signs of improving consumer sentiment, easing comps, continued equipment traction with Lumina, and gross margin expansion opportunities," analysts at the firm said.
While acknowledging the potential for short-term volatility due to average selling price pressures and unpredictable consumer behavior, Leerink Partners believes the positive aspects will prevail. The analysts emphasized Align Technology's track record of innovation, competitive moat building, and strong partnerships with dentists.
Leerink Partners had previously maintained a Market Perform rating on the stock, anticipating a weaker fiscal year 2024 with normalizing clear aligner demand in a challenging macroeconomic environment.
The uncertainty surrounding how new product launches would contribute to earnings also played a role in the former rating. However, the firm now foresees a more favorable trajectory for fiscal year 2025 growth, with operational efficiencies expected to drive further profit upside beyond 2025.
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