SmileDirectClub (NASDAQ:SDC) may appear like it has little more room to drop. But the dust hasn’t settled with SDC stock. Even as it has fallen more than 83% over the past 12 months.
It wasn’t because of some sort of market overreaction that shares in this provider of dental alignment products nosedived from above $15 to around $1.80 today. Rather, investors were on the money bidding this to rock-bottom prices. Failing to execute despite there being the perfect environment for it to operate, lackluster results and guidance have gotten SDC to where it is now. Worse yet, the bad times may be set to carry on.
So, assuming SmileDirectClub carries on with the same strategy that failed to work in past quarters? When the company next reports in early March, chances are we’ll see it miss on revenue and earnings again, just like we saw in the preceding quarter.
The recent launch of a new product may look like a possible catalyst to help turn this ship around. Unfortunately, though, I wouldn’t count on it to save the day. SDC stock is a “cheap” name that will keep getting cheaper over time. With that, there’s only one word of advice you need here: avoid.
SDC Stock and Its Steady Trip to Bottom-Barrel Prices
SmileDirectClub provides dental aligners and coordinates aligner procedures between patients and orthodontists. In its life as a public company, however, it has been a race to the bottom. Seemingly “crushing it” after its 2019 initial public offering (IPO), SmileDirectClub was a growth machine. Scaling up its annual sales from $140.3 million to $706.5 million in just two years, the teledenistry name looked primed to send its topline up into the billions.
Of course, that didn’t happen. Instead, the pandemic brought its high growth to a screeching halt. With lockdowns affecting operations, the outbreak didn’t produce the kinds of tailwinds experienced by other companies thriving during the “stay at home” economy era. SmileDirectClub instead experienced a moderate decline in 2020 sales.
Now, even with the recovery well underway, revenue has failed to bounce back to pre-Covid levels. With such disappointing results, it’s no surprise why, by early 2021, the few investors buying SDC stock weren’t doing so because of its fundamentals. They were buying the stock based on its perceived potential as a short-squeeze play.
Once the squeeze angle faded, investors who got into SDC as a trade quickly jumped ship. This helped intensify its drop through the second half of 2021.
Righting the Ship… With Whitening Strips?
SDC stock has continued to sell off in 2022, albeit at a more moderate pace compared to last year. The company’s new product launch may be playing a role in slowing down the price declines.
On Jan. 19, SmileDirectClub announced the debut of its line of fast-acting teeth whitening strips. As a product associated more with toothpaste brands than with dental alignment, this an interesting development. But not in a good way.
Of course, because this news just hit the wires, I may be jumping to conclusions. But it seems that SmileDirectClub is looking to reposition itself as an “oral care company.” In fact, it calls itself as much in the recent product press release. Granted, SDC has already been in the business of selling oral care products direct to consumers — as a sideline. Yet, as it fails to regain ground, this new offering sounds a lot like a last-ditch effort to get growth moving in the right direction.
When it comes down to it, I wouldn’t view this news as a reason to buy SDC stock.
The Verdict on SDC Stock
All told, SDC stock still earns an “F” rating in my Portfolio Grader. The story hasn’t changed here. SmilDirectClub’s revenue is heading south and losses are piling up.
Of course, the teeth whitening development may be a sign that the company’s trying to change horses in midstream, possibly transitioning itself into more of a consumer oral health brand. This may or may not work out down the road. But the new gambit isn’t going to change the bad numbers the company will likely reveal when it next reports earnings. Nor is it going to make much of an impact for the current quarterly results.
Despite a “cheap” stock price, shares of SDC will continue to fall deeper into penny territory. With little indication that its new product lines will take off, or that its alignment products will regain past popularity, take a hard pass on SDC stock.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
Louis Navellier, who has been called “one of the most important money managers of our time,” has broken the silence in this shocking “tell all” video… exposing one of the most shocking events in our country’s history… and the one move every American needs to make today.