Zacks senior healthcare analyst Gregory Aurand, CFA has recently upgraded the shares of cosmetic dentistry company Align Technology, Inc. (ALGN) from a Sell to a Hold. Here are some of the reasons why:

'Given the post-Q3 earnings stock sell-off that reached our price target, our rating moves to Hold from Sell. In our opinion, the Q307 flat ortho and GP utilization suggests the company may have fully tapped the former OrthoClear customer base, as well as fully penetrating the most easily reached segment of the U.S. malocclusion cases (currently about 20% penetration of the addressable U.S. market). It remains unclear how much of the market ALGN can continue to grow consistently or how profitably they can reach their target growth.

'For the fourth quarter, the company expects $69.5 million-$72.2 million in revenues, or growth of 26%-31%. For the full year 2007, management revised its guidance and now expects growth of 36%-38% or revenue in the range of $281.3 million-$284.0 million, slightly lower than its previous expectation of $281.6 million-$286.8 million. Given the increased costs, management's revised fourth quarter EPS guidance falls below market projections. The company pays little or no tax. We are assuming, at present, that earnings become fully-taxed in 2008 at approximately 35%.

'Our 2008 EPS estimates reflect this assumed tax impact. Excluding tax impact, our expected 2008 EPS, including stock-based compensation expense, is $0.78 vs. our 2007 expected EPS of $0.48. We believe ALGN should trade at a premium to the industry mean average of 2.6x fiscal 2008 revenues. However, we believe the current stock valuation reflects the outlook. Our target price, roughly equal to 4x our 2008 revenue estimate, in-line with the average of comparables and a 50% premium to the industry mean, remains at $19.00.'