Align Technology (ALGN) short, mcap=$21bn, price $269 vs $200

ALGN short pitch:
– Producer of Invisalign clear teeth aligners.
– Invented and won the category, crushed the competition – 75% market share.
– However, the market does not appreciate how much the demand was pulled forward during COVID.
– Has grown 20-25% during 2010-2019, but then growth exploded to 50-60% in 2021.
– Channel checks indicate prescribers of Invisalign seeing a slowdown in their business, with the 2022 year expected to be down 10% vs 2019 levels.
– Given that treatment times are 6-18 months in length, this slowdown is not yet fully visible in ALNG numbers, but inventory is increasing and deferred revenue growth is decelerating.

ALGN valuation:
– 2023 earnings are set to decline from $8/share today to closer to $6/share.
– At 20-25x PE, the target is $120-$150/share.

Exp. gain: 20-40% to $120-$150/share.

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