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Why Align Technology Stock Sank Today

By Keith Speights - Mar 11, 2020 at 4:05PM

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Investors are now even more worried about the impact of coronavirus disease COVID-19.

What happened

Shares of Align Technology (ALGN 4.51%) were sinking 11.1% lower as of 3:48 p.m. EDT on Wednesday. The sharp decline for the orthodontic-device maker came after the World Health Organization (WHO) officially declared coronavirus disease COVID-19 a pandemic.

So what

In one sense, WHO's change in designation of COVID-19 from a "global health emergency" to a pandemic doesn't really matter to Align Technology. After all, the pandemic label simply confirms what many already knew: COVID-19 has rapidly spread across the world to a large number of people.

Hand holding clear dental aligner with a reflection on the surface of a table

Image source: Getty Images.

But while many healthcare companies shouldn't be directly impacted very much by the viral disease, Align will be. It makes around 8% of total revenue in China. Concerns about the coronavirus outbreak already led the company to lower its first-quarter guidance in January. With COVID-19 now having a greater impact in countries across the world where Align does business, the company's sales could be affected even more than originally thought.

Correcting the misalignment of teeth isn't a top health priority for people. If the COVID-19 pandemic causes a recession and increased unemployment, consumers could curtail spending and choose to postpone purchasing Align's clear aligners.

Now what

For now, it's uncertain how much damage COVID-19 will have on the global economy. Align Technology's shares have already fallen more than 30% off the highs set earlier this year. It seems unlikely that the coronavirus outbreak will diminish the company's business prospects to the extent that its stock has dropped. Long-term investors could have an opportunity now to buy Align Technology at an attractive valuation.

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Stocks Mentioned

Align Technology, Inc. Stock Quote
Align Technology, Inc.
ALGN
$247.34 (4.51%) $10.67

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