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Align Technology’s Growth Prospects amid Increasing Competition

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Jan. 10 2018, Updated 8:41 p.m. ET

Overview

Align Technology (ALGN) is growing at an accelerated pace with its market-leading Invisalign clear aligners. The company generates revenues through two segments: Clear Aligner and Scanner & Services.

Align Technology reported strong earnings results for fiscal 3Q17 on October 26, 2017. The results demonstrated robust performance and growth prospects for the company.

Align Technology has an established product line in an underpenetrated market segment. The company’s Invisalign aligners have seen increasing demand in the teen market around the world.

In particular, the Chinese market is Align Technology’s major growth driver. However, the company is starting to witness strong competition from startups focused on the clear aligners market.

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Increasing competition in the clear aligners market

Align Technology (ALGN) expects some startups such as Candid and Smile Direct Club to pose competition to the company in the clear aligners market. 3M (MMM) is the largest competitor for the company.

Startups such as Candid and Smile Direct Club enable home delivery of the custom clear aligners without having to visit an orthodontist. These companies send a kit to patients, which they use to model their teeth and return to these companies. The companies determine the solutions to the patients’ dental issues and provide custom aligners.

Align Technology has an equity stake in Smile Direct Club and is one of the suppliers to the company. Other dental technology providers in the United States include Dentsply Sirona (XRAY) and Zimmer Biomet Holdings (ZBH).

Investors can consider taking exposure to Align Technology by investing in the Vanguard Total Stock Market ETF (VTI), which holds ~0.06% in ALGN stock. XRAY and ZBH comprise approximately 0.06% and 0.09% of VTI’s total holdings, respectively.

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