Morgan Stanley slashed its price target on Align Technology (NASDAQ:ALGN) and SmileDirectClub (SDC), citing softer QTD demand trends for the clear aligner makers focused on doctor-directed and direct-to-consumer markets, respectively.
Based on web traffic data, the analysts led by Erin Wright project global case volumes of Align (ALGN) to decline in 2Q, an anticipated trend given the management views for 1Q results in April when the company pulled full-year guidance.
Prompted by the gloomy outlook, the analysts trim the price target for Align (ALGN) to $479 from $524.
However, they maintain the Overweight rating on the stock noting the largely intact fundamentals in what they call an underpenetrated clear aligner market where cost cuts could be expected in the near term.
Wright and the team project an even sharper decline in case volumes for SmileDirectClub (SDC) for the quarter and cut the 2022 EBITDA estimate to reflect slower case volume growth expected for the year.
However, they note that the company opted to keep its 2022 guidance unchanged with the 1Q earnings release despite the pressure on DTC clear aligner demand amid macro challenges such as inflation.