Shares of dental company Align Technology (ALGN 3.91%) got hammered on Thursday after reporting financial results for the third quarter of 2022. Align stock was down 18% for the day as of 2:30 p.m. ET. But more than this, Align stock is also now down 72% year to date, giving it the distinction of being the worst-performing stock in the S&P 500 so far this year.
Align Technology makes money from its clear Invisalign retainers and with its iTero technology. In Q3, the company generated revenue of $890 million, down 12% year over year and roughly $60 million less than what analysts had expected.
Management said about $25 million of this underperformance was due to unfavorable foreign currency exchange rates. But with clear alignment shipments down 12.5% year over year, there's no denying that business is slow for Align right now.
Align's profits dropped significantly as well. In Q3, the company recorded net income of $72.7 million, down nearly 60% from the $181 million it recorded in the same quarter last year.
Analysts were lowering their price targets for Align stock today, which likely contributed to the stock's drop. However, it's worth noting that many on Wall Street still believe Align is worth owning. For example, in lowering his price target for Align stock by 18% to $265 per share, Stifel analyst Jonathan Block pointed out the strength of Align's market share in the dental space, according to The Fly. And to Block's point, over 234,000 dental practitioners use Align's technology, which is a strong competitive advantage.
If there's any consolation for shareholders of the worst performer in the S&P 500, it's that Align Technology remains profitable and is repurchasing its own shares at lower prices. While it didn't repurchase any shares in Q3, management plans to use around $200 million before the end of the year on share repurchases. That's almost 1.5% of shares outstanding in a single quarter, which is pretty significant.
However, investors will want to see more than share repurchases long term. Align believes it can still gain more market share, and shareholders should watch for evidence this is true in coming quarters.