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Here's Why Investors Should Retain SmileDirectClub (SDC) Now
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SmileDirectClub, Inc is well-poised for growth in the coming quarters, backed by the company’s efforts to produce innovative technology-driven solutions while maintaining disciplined cost controls. With the launch of the SmileMaker Platform in the U.S. market and the rollout of the CarePlus offering, the company’s successful investments in innovations buoy optimism. The gross margin expansion in the first quarter is encouraging.
However, operating in a tough competitive space amid continued macroeconomic headwinds is concerning.
In the past year, this Zacks Rank #3 (Hold) stock has decreased 63.6% against the 19.7% growth of the industry and a 17.3% rise of the S&P 500 composite.
The renowned oral care company has a market capitalization of $161.4 million. SDC projects a long-term estimated earnings growth rate of 20.3%, ahead of the industry’s expected growth rate of 11.6%. SmileDirectClub delivered an average negative earnings surprise of 0.81% in the trailing four quarters.
Let’s delve deeper.
Factors at Play
Innovations Aid Growth: In May 2023, SmileDirectClub announced the launch of its innovative SMP in the United States, expanding its patented technology to its largest market. The technology is an industry first, upgrading current 2D remote scanning options and introducing real-time AI to capture a 3D view of teeth.
Earlier in February, SDC launched its new premium aligner treatment, CarePlus which is presently available at select Partner Network dentist locations. The company also announced the addition of a new Sensitivity-Free Whitening Kit to its innovative suite of premium, affordable oral care products.
Image Source: Zacks Investment Research
Strategic Alliances Add Value: In terms of retail partnerships, SmileDirectClub’s oral care products are now available at more than 12,500 retail stores nationwide, including Walmart, CVS, Walgreens, and Sam's Club. In the first quarter, SDC introduced sales specialists in targeted partner network practices to better educate customers about the differences between its two service offerings, CarePlus and traditional virtual care offering.
Long-Term Growth Targets: SmileDirectClub’s long-term strategy includes achieving the average revenue growth target of 20%-30% per year and adjusted EBITDA margins of 25%-30% for the next five years. This implies a long-term target on a sequential basis of 5% -7% each quarter. Per the company, this long-term revenue target reflects the efforts to capture market share while improving customer experience.
For 2023, SmileDirectClub expects total core business revenues in the range of $400-$450 million. SDC’s revenues in the first quarter of 2023 were well ahead of estimates.
Downsides
Q1 Negatives: The company posted a year-over-year decline in revenues due to persistent macroeconomic headwinds, driven by high inflation that impacted its customer base. Earnings for the quarter missed estimates. Meanwhile, the operating loss trend continued, with the company posting a narrower loss in the first quarter, than the year-ago adjusted figure.
A Tough Competitive Landscape: SmileDirectClub competes with a handful of smaller companies that collectively have a limited market share in the clear aligner industry, including Candid Co., Byte (Dentsply) and SnapCorrect. Following the introduction of the company’s collaborative and wholesale partner network, it also faces competition from more well-established competitors in the traditional orthodontic industry, which requires in-person visits, such as Align Technology, Inc.
Estimate Trend
The Zacks Consensus Estimate for SmileDirectClub’s 2023 loss per share has remained constant at 42 cents in the past 30 days.
The Zacks Consensus Estimate for the company’s 2023 revenues is pegged at $433.9 million. This suggests a 7.8% drop from the year-ago reported number.
Zimmer Biomet has an earnings yield of 5.44% compared to the industry’s -2.30%. Zimmer Biomet’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 7.38%. Its shares have increased 33.8% against the industry’s 23.1% decline in the past year.
Penumbra, sporting a Zacks Rank #1 at present, has an estimated growth rate of 64.1% for 2024. Penumbra shares have risen 176.4% compared with the industry’s 14.3% increase over the past year.
PEN’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 109.4%.
Hologic, carrying a Zacks Rank #2 (Buy) at present, has an earnings yield of 4.93% compared to the industry’s -7.03%. Shares of HOLX have risen 14.4% compared with the industry’s 14.3% growth over the past year.
Hologic’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 27.3%.
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Here's Why Investors Should Retain SmileDirectClub (SDC) Now
SmileDirectClub, Inc is well-poised for growth in the coming quarters, backed by the company’s efforts to produce innovative technology-driven solutions while maintaining disciplined cost controls. With the launch of the SmileMaker Platform in the U.S. market and the rollout of the CarePlus offering, the company’s successful investments in innovations buoy optimism. The gross margin expansion in the first quarter is encouraging.
However, operating in a tough competitive space amid continued macroeconomic headwinds is concerning.
In the past year, this Zacks Rank #3 (Hold) stock has decreased 63.6% against the 19.7% growth of the industry and a 17.3% rise of the S&P 500 composite.
The renowned oral care company has a market capitalization of $161.4 million. SDC projects a long-term estimated earnings growth rate of 20.3%, ahead of the industry’s expected growth rate of 11.6%. SmileDirectClub delivered an average negative earnings surprise of 0.81% in the trailing four quarters.
Let’s delve deeper.
Factors at Play
Innovations Aid Growth: In May 2023, SmileDirectClub announced the launch of its innovative SMP in the United States, expanding its patented technology to its largest market. The technology is an industry first, upgrading current 2D remote scanning options and introducing real-time AI to capture a 3D view of teeth.
Earlier in February, SDC launched its new premium aligner treatment, CarePlus which is presently available at select Partner Network dentist locations. The company also announced the addition of a new Sensitivity-Free Whitening Kit to its innovative suite of premium, affordable oral care products.
Image Source: Zacks Investment Research
Strategic Alliances Add Value: In terms of retail partnerships, SmileDirectClub’s oral care products are now available at more than 12,500 retail stores nationwide, including Walmart, CVS, Walgreens, and Sam's Club. In the first quarter, SDC introduced sales specialists in targeted partner network practices to better educate customers about the differences between its two service offerings, CarePlus and traditional virtual care offering.
Long-Term Growth Targets: SmileDirectClub’s long-term strategy includes achieving the average revenue growth target of 20%-30% per year and adjusted EBITDA margins of 25%-30% for the next five years. This implies a long-term target on a sequential basis of 5% -7% each quarter. Per the company, this long-term revenue target reflects the efforts to capture market share while improving customer experience.
For 2023, SmileDirectClub expects total core business revenues in the range of $400-$450 million. SDC’s revenues in the first quarter of 2023 were well ahead of estimates.
Downsides
Q1 Negatives: The company posted a year-over-year decline in revenues due to persistent macroeconomic headwinds, driven by high inflation that impacted its customer base. Earnings for the quarter missed estimates. Meanwhile, the operating loss trend continued, with the company posting a narrower loss in the first quarter, than the year-ago adjusted figure.
A Tough Competitive Landscape: SmileDirectClub competes with a handful of smaller companies that collectively have a limited market share in the clear aligner industry, including Candid Co., Byte (Dentsply) and SnapCorrect. Following the introduction of the company’s collaborative and wholesale partner network, it also faces competition from more well-established competitors in the traditional orthodontic industry, which requires in-person visits, such as Align Technology, Inc.
Estimate Trend
The Zacks Consensus Estimate for SmileDirectClub’s 2023 loss per share has remained constant at 42 cents in the past 30 days.
The Zacks Consensus Estimate for the company’s 2023 revenues is pegged at $433.9 million. This suggests a 7.8% drop from the year-ago reported number.
Key Picks
Some better-ranked stocks in the broader medical space are Zimmer Biomet (ZBH - Free Report) , Penumbra (PEN - Free Report) and Hologic, Inc. (HOLX - Free Report) .
Zimmer Biomet has an earnings yield of 5.44% compared to the industry’s -2.30%. Zimmer Biomet’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 7.38%. Its shares have increased 33.8% against the industry’s 23.1% decline in the past year.
ZBH sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Penumbra, sporting a Zacks Rank #1 at present, has an estimated growth rate of 64.1% for 2024. Penumbra shares have risen 176.4% compared with the industry’s 14.3% increase over the past year.
PEN’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 109.4%.
Hologic, carrying a Zacks Rank #2 (Buy) at present, has an earnings yield of 4.93% compared to the industry’s -7.03%. Shares of HOLX have risen 14.4% compared with the industry’s 14.3% growth over the past year.
Hologic’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 27.3%.