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Why Align Technology, HCA Healthcare, and HealthEquity Shares Soared Today

By Brian Feroldi – May 18, 2020 at 3:50PM

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It was a pleasant start to the trading week.

What happened

Shares of Align Technology (ALGN 2.06%), HCA Healthcare (HCA -1.32%), and HealthEquity (HQY -2.41%) rose big on Monday. These healthcare stocks all jumped by at least 9% in early morning trading. As of 2:35 p.m. EDT today, they were up 12%, 8%, and 7%, respectively. 

So what

Wall Street appeared to be in a good mood on Monday. All three major U.S. stock market indexes are firmly in the green in the afternoon. It's hard to pinpoint the exact source of the bullish sentiment, but a few news items could be responsible. 

Two hands pulling in a pile of money

Image source: Getty Images.

First, Moderna (NASDAQ:MRNA), a high-flying biotechnology company, announced upbeat interim data from a phase 1 clinical study of a hopeful vaccine for the novel coronavirus. The compound, called mRNA-1273, is already in a phase 2 study, and Moderna hopes to kick off a phase 3 study as early as July. If it proves to be the real deal, then that would obviously be a huge win for humanity.

Second, Federal Reserve Chairman Jerome Powell told CBS' 60 Minutes on Sunday that "There's a lot more we can do" to help the economy. He also said that a recovery is possible in the second half of the year.

Third, more states are choosing to reopen for business, an upbeat signal for investors.

It's impossible to pinpoint which of these news stories is leading a rally today, but the S&P 500, the Dow, and Nasdaq are all up at least 2%.

Align Technology, HCA Healthcare, and HealthEquity all appear to be soaring even higher in response to the bullish sentiment.

Now what

Many growth stocks have rallied hard off of their lows, but Align Technology, HCA Healthcare, and HealthEquity have all been left behind. Even after accounting for today's jump, these stocks are still down at least 23% from the year-to-date highs, and it's not hard to figure out why.

Align Technology is the company behind the Invisalign clear dental aligners, which are a discretionary healthcare purchase. Demand for the company's products swooned in the first quarter, and Align was only able to produce revenue growth of 0.4%. Management also withdrew its guidance for the year. It is understandable that traders have turned sour on this former highflier.

HealthEquity, a leading provider of health savings accounts, has been in the doghouse for the last few months because management initially told Wall Street to expect revenue to land between $812 million to $820 million in 2020, but later reduced that range to just $770 million to $790 million. The decline was caused by the Fed's surprise interest rate cut, which is understandable, but that detail hasn't mattered much to traders.

Investors have also tossed aside shares of HCA Healthcare, which owns and operates hospitals. That bearishness is understandable. Lots of hospitals have struggled with the financial impact of COVID-19. In the first quarter, HCA's revenue grew 3%, but its net income contracted by 44%. Management also suspended its dividend to preserve cash, which makes sense, but obviously didn't make income investors happy. 

It's hard to say what the long-term fallout of COVID-19 will be on all of these businesses. My best guess is that they all recover and be just fine in the long term, but 2020 (and possibly 2021) might be a tough slog.

The good news is that all of them hold enviable competitive positions in their industry and are well positioned to ride long-term trends. If that's true, then investors' best move is probably to ignore the day-to-day gyrations and stay focused on their fundamentals. 

Brian Feroldi owns shares of Align Technology and HealthEquity. The Motley Fool owns shares of and recommends Align Technology and HealthEquity. The Motley Fool recommends HCA Healthcare. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Align Technology, Inc. Stock Quote
Align Technology, Inc.
$222.43 (2.06%) $4.48
HCA Healthcare, Inc. Stock Quote
HCA Healthcare, Inc.
$191.50 (-1.32%) $-2.56
HealthEquity, Inc. Stock Quote
HealthEquity, Inc.
$71.73 (-2.41%) $-1.77

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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