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China is hurting the braces market. Align Technology’s stock plunges more than 25%

Posted at 1:26 PM, Jul 25, 2019
and last updated 2019-07-25 17:41:09-04

China’s slumping economy has hurt a number of industries, ranging from Big Tech to manufacturing. We can now add dental equipment companies to the list.

Align Technology, maker of the popular Invisalign brand of braces, issued a profit warning Wednesday night when it reported its latest sales and earnings figures. Align, based in San Jose, California, said slowing demand in China was one of the primary reasons for the weak outlook.

“Given the uncertainty in China, our outlook for the third quarter reflects a more cautious view for growth in the Asia Pacific region,” Align CEO Joe Hogan said in a statement.

Shares of Align plunged more than 25% on the news Thursday, making the stock the worst performer in the S&P 500 by far.

Although Align shipped fewer Invisalign cases than it had expected, Hogan added during a conference call with analysts that the company still views China as a major market opportunity. More than 40% of the nearly 2,000 doctors in Asia that the company trained last quarter were in China, Hogan noted.

“Notwithstanding current consumer sentiment, we remain confident in the long-term opportunity in China,” he said, adding that Align is making bets that business will improve in China.

For example, Hogan said that the company continues to invest in Asian manufacturing and training centers “to ensure that we operate like a local company.” The company will continue to expand in smaller cities in China, and it is planning to invest even more on a dedicated dentist sales force in China for its Invisalign Go clear aligners. And Align will spend more on TV and digital ads in China.

But for the time being, a suddenly skittish Chinese consumer apparently isn’t willing to spend to improve their smiles — and that’s causing a lot of frowns for Align’s investors on Wall Street.