Align Earnings: Crooked Third-Quarter Results Leave Investors Frowning, but We Think Shares Are Cheap

Narrow-moat Align Technology reported disappointing third-quarter results and, after adjusting our model, we've lowered our fair value estimate to $316 per share, down from $338. Total sales were up 7.8% year over year, but difficult macroeconomic conditions and weaker consumer sentiment weighed down top and bottom line, both of which missed consensus. Dynamic conditions driven by lower demand, especially from adult patients, loomed over the firm during the quarter and we expect this concern to continue throughout the year. Management, citing reports of deceleration for orthodontic treatment for September, trimmed full-year sales guidance roughly 4% and expects lower operating margin compared with last year.