SmileDirectClub: Buy, Sell, or Hold? – July 1, 2021
SmileDirectClub (SDC) is an oral care business headquartered in Nashville. SDC’s brass insists the company has created the first-ever medical technology platform to straighten teeth.
SDC’s teledentistry tech, complete with its vertically integrated model, proves quite crucial for improving oral health and beauty. The company’s translucent aligner system known as Invisalign straightens wayward teeth and improperly spaced teeth in as little as a year. In short, SDC is a disruptor stealing market share from companies that previously sold braces without minimal competition.
SDC clearly has merit. The question is whether now is the opportune time to buy, sell, or hold. Let’s find out if SDC is deserving of a place in your portfolio.
SDC Points of Note
SDC is a volatile stock, as evidenced by its beta of 2.65. This high beta indicates the stock is more than 2.5 times as volatile as the market. SDC is currently trading at $8.65, which represents about half of the stock’s 52-week high. Its 52-week low is $7.16.
SDC has been in the news of late as the company suffered a cyber-attack. SDC’s latest quarterly earnings were also disappointing to the point that they were newsworthy. The financing revenue stemming from SDC’s SmilePay program in the year’s first quarter dropped more than 15% on a year-over-year basis.
Unfortunately, SDC suffered an operating loss in the period. SDC becomes even more concerning when you examine its balance sheet. SDC’s operating cash flow for the quarter was -$28.3 million. The company’s free cash flow for the quarter also raised some eyebrows as it came in at -$51 million.
SDC According to Analysts
Analysts are bullish on SDC. The average analyst target price for the stock is $10.95. If SDC hits this level, it will have popped by nearly 20%. The highest target for the price is an eye-popping $17. The stock’s lowest target price is $7.
POWR Ratings
SDC is a POWR Ratings disappointment with an overall grade of D and a Sell rating. SDC has grades of C in the Value and Momentum components and a D Quality Grade.
Of the 183 publicly traded companies in the Medical – Devices & Equipment industry, SDC is ranked 136th.
Buy, Sell or Hold?
There is no question SDC has a unique value offering. Dentists far and wide rave about SDC’s Invisalign teeth straightening solution. It might not be long until Invisalign completely unseats braces as the cheapest and best way to straighten crooked or improperly spaced teeth. In other words, there is hope for SDC’s cash flow to become positive at some point down the line.
But presently, SDC is a Sell. Though the stock has considerable growth potential, it is not worth buying currently. Its financial situation is concerning, and its Sell rating in the POWR Ratings system doesn’t bode well. Investors would be wise to wait for SDC to improve its fundamentals and have a Buy rating or higher in the POWR Ratings system before establishing a position.
SDC shares rose $0.07 (+0.81%) in premarket trading Thursday. Year-to-date, SDC has declined -26.55%, versus a 15.41% rise in the benchmark S&P 500 index during the same period.
Author: Patrick Ryan