ALGN’s Stock Price Set to Plummet: A Promising Short Opportunity in 2024

As we head into the second half of 2024, ALGN appears to be a promising short opportunity for several reasons. In recent years, our focus has been on increasing our exposure to discretionary medical spending on the short side, and we have recently added PDCO to our existing short position in EYE. Our analysis shows that ALGN’s North American GP utilization has been declining leading up to the second quarter of 2024, with a slight revenue miss in the same period. This presents a good opportunity for a short position, especially after the company recently raised its guidance for 2024.

ALGN’s stock performance is closely tied to EPS estimates, with a notable floor at 20 times forward P/E. However, we anticipate a more challenging outlook for the second half of 2024, compounded by growing macroeconomic concerns and reduced forecasts for 2025. These factors could potentially break through the 20X floor and drive ALGN’s stock price below $200, representing a 20% drop from its current level. Overall, we believe that ALGN is a promising short opportunity as we enter the second half of 2024.