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Why Align Technology Stock Fell 20% in March

By Jon Quast – Apr 6, 2020 at 4:53PM

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The COVID-19 pandemic has disrupted dentistry worldwide.

What happened

Shares of Align Technology (ALGN -2.80%) were down 20.3% this month, according to data provided by S&P Global Market Intelligence. Its stock began trending downward in January, after it informed investors that the novel coronavirus was affecting its business in China. Since then, COVID-19 has become a global pandemic, disrupting Align Technology's business around the world.

So what

Align Technology reported fourth-quarter 2019 earnings on Jan. 9, with quarterly revenue of $650 million coming in at the high end of its guidance. However, it gave an update regarding the coronavirus. At the time, the disease was still very limited to China, where Align Technology generates 8% of its revenue. As a result of quarantine efforts there, it expected a $30 million to $35 million hit on revenue for the first quarter alone.

A woman holds up a clear teeth aligner

Align Technology makes clear retainers to straighten teeth. Image source: Getty Images.

On March 18, Align Technology gave a second update regarding COVID-19. As the coronavirus spread, its business operations were disrupted everywhere. The company does business around the world, but about half of 2019's clear aligner revenue still came from the Americas region. Currently, the U.S. Center for Disease Control is recommending dentists postpone all non-urgent dentistry. Teeth straightening is non-urgent. 

Align Technology's Invisalign treatment may be extremely popular, but the coronavirus is drastically reducing current demand both domestically and internationally.

Now what

It's clear that investors haven't lost all faith in Align Technology. As of this writing, the stock is (surprisingly) up nearly 30% since March 23. However, there's a good amount of investor fear still baked in. The stock is down 47% from 52-week highs, even after its recovery in recent days. That fear is understandable. Revenue is being affected, and there's no way to know how much longer it will last.

That said, Align Technology has demonstrated consistent long-term revenue growth that has turned this into one of the top stocks of the past decade. Currently with $869 million in cash, cash equivalents, and marketable securities, and only $37 million in long-term debt, the company is in a strong position to weather this storm and resume future growth when the world returns to normal. 

Jon Quast has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Align Technology. The Motley Fool has a disclosure policy.

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