Geopolitical and economic issues, including high inflation, multi-year high 10-year U.S. treasury yield, the Fed’s tighter monetary policy, deepening supply chain constraints, and the escalating war in Russia-Ukraine have been weighing on the markets. Furthermore, consumer prices climbed further in March and hit 8.5% annually, its highest level since December 1981, contributing to the bearish investor sentiment. The S&P 500 has been down 2.2% over the past five days, while the Nasdaq Composite fell 3.1% over this period.
Despite the current challenges, the U.S. added 431,000 jobs in March, bringing the unemployment rate to 3.6%. Furthermore, the labor force participation rate has started to rise, and corporate profits in the last quarter are satisfactory, indicating a 21% increase from pre-pandemic levels. Such factors are expected to benefit growth-based companies with solid fundamentals and robust growth prospects. Investors’ interest in growth stocks is evident in the SPDR Portfolio S&P 500 Growth ETF’s (SPYG) 3.3% gains over the past year.
So, we think growth stocks Dropbox, Inc. (DBX) and Align Technology, Inc. (ALGN) are well-positioned to capitalize on this year’s economic recovery prospects.
Dropbox, Inc. (DBX)
DBX in San Francisco, Calif., provides a content collaboration platform worldwide. The company’s platform allows individuals, teams, and organizations to collaborate and sign up for free through its website and app. It has more than 700 million registered users. DBX serves customers in professional services, and the technology, media, education, industrial, consumer, and financial services industries.
On February 11, DBX’s board of directors authorized DBX to repurchase an additional $1.2 billion of its Class A common stock. The repurchase will be executed, subject to general business, market conditions, and other investment opportunities through open market purchases or privately negotiated transactions. This might reduce the number of outstanding shares of DBX and increase its value.
DBX’s revenue increased 12.2% year-over-year to $565.50 million in its fiscal year 2021 fourth quarter, ended Dec. 31, 2021. Its gross profit improved 12.9% year-over-year to $449.70 million. DBX’s income from operations grew 120.3% from its year-ago value to $70.20 million. The company’s net income and net income per share came in at $124.60 million and $0.32, respectively, registering an increase of 136% and 138.1% from the prior-year period.
Analysts expect DBX’s revenue for its fiscal year 2022 first quarter, ended March 31, 2022, to come in at $559.03 million, representing a 9.3% rise year-over-year. The Street expects the company’s EPS for the to-be-reported quarter to come in at $0.38, representing a 7.5% increase year-over-year. The company has an impressive earnings surprise history; it has surpassed the consensus EPS estimates in each of the trailing four quarters.
The stock gained marginally over the past month and closed Thursday’s trading session at $23.07.
DBX’s POWR Ratings reflect this promising outlook. It has an overall B grade, which equates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
DBX has an A grade for Quality and a B for Growth and Value. Within the Technology – Services industry, it is ranked #11 of 81 stocks.
To see additional POWR Ratings (Stability, Momentum, Quality, and Sentiment) for DBX, click here.
Align Technology, Inc. (ALGN)
ALGN is a leading medical device company that designs, manufactures, and markets Invisalign clear aligners, iTero intraoral scanners, and exocad CAD/CAM software for digital orthodontists, general practitioners, dentists, and aesthetic dentists. The Phoenix, Ariz.-based company operates through two segments: Clear Aligner; and Scanners and Services. It sells its products in the U.S., Switzerland, China, and internationally.
Last month, ALGN launched the new digitally integrating Cone Beam Computed Tomography (CBCT) scan and intraoral scan data into ChinCheck treatment plans. This introduction enables doctors to visualize a patient’s dental roots underlying bone structure from different angles. The CBCT integration feature helps doctors expand diagnosis and treat a broader range of cases. This launch is expected to boost the company’s profitability.
This February, ALGN announced Invisalign System Innovations for the Align Digital Platform, a proprietary combination of software, systems, and services that enhance practice efficiency and doctor-patient engagement. These new Invisalign system innovations include ChinCheck Live Update for 3D controls, the Invisalign Practice App, Invisalign Personalized Plan (IPP), and Invisalign Smile Architect, which might revolutionize orthodontic and restorative dental treatment planning.
In its fiscal 2021 fourth quarter, ended Dec. 31, 2021, ALGN’s net revenues increased 23.6% year-over-year to $1.03 billion, and its gross profit grew 22% year-over-year to $748.82 million. Its income from operations rose 5.3% year-over-year to $254.46 million. ALGN’s net income and net income per share were $224.48 million and $2.40, respectively, registering a rise of 8.1% and 8.4% year-over-year.
The $4.75 billion consensus revenue estimate for its fiscal year 2022, ending Dec. 31, 2022, represents 20.1% year-over-year growth. The $12.76 consensus EPS estimate for the current year represents a rise of 13.7% from the last year. ALGN has surpassed the consensus EPS estimates in each of the trailing four quarters.
The stock declined 31.1% in price over the past six months. It closed Thursday’s trading session at $409.82.
ALGN’s POWR Ratings reflect a strong outlook. The stock has a B grade for Sentiment and Quality. It is ranked #56 of 159 stocks in the Medical – Devices & Equipment industry.
Click here to see ALGN’s POWR Ratings for Stability, Momentum, Value, and Growth.
Click here to checkout our Healthcare Sector Report for 2022
What To Do Next?
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What makes them “MUST OWN“?
All 9 picks have strong fundamentals and are experiencing tremendous momentum. They also contain a winning blend of growth and value attributes that generates a catalyst for serious outperformance.
Even more important, each recently earned a Buy rating from our coveted POWR Ratings system where the A rated stocks have gained +48.22% a year.
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REVISED: 2023 Stock Market Outlook (includes top 7 picks)
DBX shares were trading at $22.57 per share on Monday afternoon, down $0.50 (-2.17%). Year-to-date, DBX has declined -8.03%, versus a -7.94% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions. More...
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