SmileDirectClub, Inc.’s SDC shares will likely gain in the coming quarters, backed by significant advancements in its strategic priorities with the rollout of CarePlus in domestic markets. The company has factored in the new AI capability to its advanced SMP, which was recently introduced in select markets in the United States. However, challenges to consumer spending and sustained high inflation continue to impact SDC’s overall demand in the core business.
In the past year, this Zacks Rank #3 (Hold) stock has lost 69.5% against a 12.7% growth of the industry and a 14.6% rise of the S&P 500 composite.
The renowned oral care company has a market capitalization of $149.0 million. SDC projects a long-term estimated earnings growth rate of 20.4%, ahead of the industry’s expected growth rate of 12.8%. SmileDirectClub delivered an average earnings surprise of 2.46% in the trailing four quarters.
Let’s delve deeper.
Factors at Play
Strategic Alliances Add Growth: In terms of retail partnership, SmileDirectClub’s oral care products are now available at over 12,500 retail stores nationwide, including Walmart, CVS, Walgreens, and Sam's Club. These partnerships aim to serve as a highly efficient lead source and brand-building opportunity.
The company introduced SmileDirectClub sales specialists in targeted partner network practices to better educate customers about the differences between its two service offerings, CarePlus and traditional virtual care offerings.
Management expects that by the end of August, SmileShop team members at all locations in the United States will have the ability to provide a dual journey offering that educates and allows customers, with bookings at CarePlus partner network practices - the option to choose between CarePlus and virtual care regardless of the initial appointment type book.
Innovations Aid Growth: SmileDirectClub is focused on developing transformative innovations to serve the growing needs of the current customer base and expanded segments of higher-income demographics and teams.
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In May 2023, SmileDirectClub announced the U.S. launch of its SmileMaker Platform (SMP), expanding its patented technology to its largest market. This patented technology is an industry first, upgrading current 2D remote scanning options and introducing real-time AI to capture a 3D view of the teeth.
Upbeat Guidance: SmileDirectClub’s total revenues from the core business are now expected to be in the range of $425-$475 million compared with the previously issued guidance in the band of $400-$450 million.
The gross margin (as a percentage of total revenues) is expected to be in the range of 73-76% (previously 72-75%) for the full year.
Downsides
Continued Macro Headwinds: In the face of an unpredictable macroeconomic environment, SDC’s core business faces the brunt of the increased inflationary impact on its customers, reflected in the lower consumer discretionary spending and a challenging economic environment.
Tough Competitive Landscape: SmileDirectClub competes with a handful of smaller companies with limited market share in the precise aligner industry, including Candid Co., Byte (Dentsply) and SnapCorrect. With 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 been moved to 46 cents from 44 cents in the past 90 days.
The Zacks Consensus Estimate for the company’s 2023 revenues is pegged at $438.1 million. This suggests a 6.9% drop from the year-ago reported number.
Key Picks
Some better-ranked stocks in the broader medical space are Haemonetics HAE, Quanterix QTRX and SiBone SIBN. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Haemonetics’ stock has risen 19.9% in the past year. Earnings estimates for Haemonetics have increased from $3.56 to $3.74 in 2023 and $3.96 to $4.07 in 2024 in the past 30 days. It currently carries Zacks Rank #2 (Buy).
HAE’s earnings beat estimates in each of the trailing four quarters, delivering an average surprise of 19.39%. In the last reported quarter, it posted an earnings surprise of 38.16%
Estimates for Quanterix’s 2023 loss per share have narrowed from $1.19 to 97 cents in the past 30 days. Shares of the company have increased 167.5% in the past year against the industry’s decline of 1.7%. It currently carries Zacks Rank #2.
QTRX’s earnings beat estimates in each of the trailing four quarters, delivering an average surprise of 30.39%. In the last reported quarter, it posted an earnings surprise of 55.56%.
Estimates for SiBone’s2023 loss have narrowed from $1.42 to $1.27 per share in the past 30 days. Shares of the company have increased 31% in the past year compared with the industry’s rise of 1.9%. It currently carries Zacks Rank #2.
SIBN’s earnings beat estimates in all the trailing four quarters, the average surprise being 20.37%. In the last reported quarter, SiBone delivered an earnings surprise of 26.83%.
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