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Why Align Technology Shares Cratered

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Align Technology (Nasdaq: ALGN  )  -- the company behind Invisalign braces, as well as other computer-aided design and manufacturing technology for the dental industry -- imploded today, falling as much as 28% after releasing its preliminary third-quarter results.

So what: The third quarter is historically a slower time of year for Align, but this goes far beyond that. The company announced that its preliminary third-quarter results point to an 8% increase in revenue to $136.5 million and $0.28 in EPS. Both results fell shy of Wall Street's expectations of $0.29 in EPS and $140.2 million in revenue. Align's fourth-quarter forecast also disappointed, falling short of the consensus figures. Align blamed the poor results and forecast on weaker sales in the North American market, and the termination of a distribution agreement for its iTero intra-oral scanners, which could result in a goodwill impairment charge either this quarter or next quarter.

Now what: Align Technology wasn't particularly cheap prior to today's tumble, and it's still not particularly attractive with a goodwill cloud overhanging its earnings forecast for the remainder of 2012. I will say that I do like the long-term prospects for dental companies as they have incredible margins for the products they create, but with consumer spending growth so weak right now, I could easily see some consumers postponing elective dental procedures, which could hurt Align even further. For now I'm happy just adding it to My Watchlist.

Craving more input? Start by adding Align Technology to your free and personalized watchlist so you can keep up on the latest news with the company.

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

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Related Tickers

10/21/2016 4:00 PM
ALGN $89.50 Down -2.03 -2.22%
Align Technology CAPS Rating: ****