Align Technology, Inc. (NASDAQ:ALGN) shareholders will have a reason to smile today, with the analysts making substantial upgrades to next year's forecasts. The analysts greatly increased their revenue estimates, suggesting a stark improvement in business fundamentals. The market may be pricing in some blue sky too, with the share price gaining 39% to US$455 in the last 7 days. Could this upgrade be enough to drive the stock even higher?
Following the upgrade, the current consensus from Align Technology's 15 analysts is for revenues of US$3.2b in 2021 which - if met - would reflect a substantial 40% increase on its sales over the past 12 months. Statutory earnings per share are anticipated to dive 68% to US$6.98 in the same period. Previously, the analysts had been modelling revenues of US$2.9b and earnings per share (EPS) of US$5.85 in 2021. So we can see there's been a pretty clear increase in analyst sentiment in recent times, with both revenues and earnings per share receiving a decent lift in the latest estimates.
With these upgrades, we're not surprised to see that the analysts have lifted their price target 26% to US$405 per share. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on Align Technology, with the most bullish analyst valuing it at US$500 and the most bearish at US$175 per share. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.
Of course, another way to look at these forecasts is to place them into context against the industry itself. The analysts are definitely expecting Align Technology's growth to accelerate, with the forecast 40% growth ranking favourably alongside historical growth of 22% per annum over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 9.7% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Align Technology to grow faster than the wider industry.
The Bottom Line
The most important thing to take away from this upgrade is that analysts upgraded their earnings per share estimates for next year, expecting improving business conditions. Fortunately, analysts also upgraded their revenue estimates, and our data indicates sales are expected to perform better than the wider market. With a serious upgrade to expectations and a rising price target, it might be time to take another look at Align Technology.
Analysts are definitely bullish on Align Technology, but no company is perfect. Indeed, you should know that there are several potential concerns to be aware of, including concerns around earnings quality. For more information, you can click through to our platform to learn more about this and the 2 other flags we've identified .
Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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