Align draws double downgrade at Goldman Sachs after 2Q results

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The shares of Align Technology (NASDAQ:ALGN) lost ~5% in the pre-market after the company’s 2Q 2022 results prompted Goldman Sachs to downgrade the clear aligner maker to Sell from Buy due to concerns over growth in a challenging macro environment.

“While weaker demand is the biggest variable in the near-term, our Sell thesis is also based on a more conservative view of long-term growth as elective treatment demand normalizes post pandemic,” the analysts wrote.

The team points out that Align (ALGN) shares trade over 60% below a Sep. 2021 peak, while S&P 500 has lost only 15% during the period. However, the stock could continue to underperform relatively if the recovery in growth lags company expectations, the analysts added, slashing their price target to $250 per share.

In addition, Goldman Sachs expects Align’s (ALGN) valuation to remain under pressure given the lower growth setup and argues that the stock no longer screens as cheap compared to high-growth peers in healthcare.

Wall Street has remained bullish on Align (ALGN) stock, with an average rating of Buy from analysts, while Seeking Alpha Authors rated it as a Hold. However, our quant system, which consistently beats the market, rated ALGN as a Strong Sell.