HSBC Downgrades Align Technology (ALGN) to Hold

HSBC analyst Sidharth Sahoo downgraded Align Technology (NASDAQ: ALGN) from Buy to Hold with a price target of $170.00 (from $290.00).

The analyst comments: "Our adjusted present value (APV) based TP is now USD170.00 (previously USD290.00), driven by a higher WACC and lower estimates. Our assumptions include WACC of 10.4% (previously 8.0%), cost of equity of 11.2% (previously 8.90%), based on a risk-free rate of 3.75% (unchanged) and equity risk premium of 4.25% (unchanged). We include an additional ERP in our WACC calculation of 150bp (comprising 50bp MedTech premium and 100bp premium related to macro uncertainty and tariff risks), compared with no additional premium previously. Our LSEG DataStream based beta is 1.3 (previously 1.2). The additional 100bp risk premium is based on heightened risks for a potential recession and reliance on manufacturing outside the US for US sales. Our TP implies c2% downside and we downgrade to Hold (from Buy) as short-term growth visibility remains weak."

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Shares of Align Technology closed at $184.27 yesterday.

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