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SmileDirectClub (SDC) Reels Under Cyber Attack, Pandemic Woes

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At present, operating loss, leveraged balance sheet and a tough competitive landscape are major overhangs for SmileDirectClub, Inc. SDC. The stock currently carries a Zacks Rank #4 (Sell).

Over the past three months, shares of SmileDirectClub have underperformed the industry. The stock has declined 15.1% against the industry’s 5% rise. The company’s first-quarter adjusted loss was wider than the Zacks Consensus Estimate.

Financing revenues (interest associated with SmilePay program)in the first quarter of 2021 were down 15.7% year over year. Further, the company incurred operating loss in the quarter. In terms of balance sheet, operating cash flow was negative $28.3 million. Free cash flow for the first quarter was negative $51 million.

We are also apprehensive about the impact of the recent systems outage caused by a cyber attack. The company apprehends this incidence to have an adverse impact on its second-quarter revenues to the tune of approximately $10-$15 million.

SmileDirectClub, Inc. Price

SmileDirectClub, Inc. Price
SmileDirectClub, Inc. Price

SmileDirectClub, Inc. price | SmileDirectClub, Inc. Quote

On a positive note, strong product line, growth across teledentistry space, and strategic retail and insurance partnerships boost our confidence on the stock for long-term growth.

Realizing enormous prospects of teledentistry space, SmileDirectClub has extended its teledentistry platform to dental and orthodontic offices through a collaborative model. The company is currently providing a doctor-directed digital end-to-end experience in teledentistry, with 24/7 access to orthodontic care and the back end of lifetime smile guarantee. The company continues to see favorable industry dynamics with broader acceptance of telehealth and specifically, teledentistry.

SmileDirectClub’s long-term strategy includes achieving average revenue growth target of 20% to 30% per year. Prior to the cyber-attack-led revenue guidance update, the company’s Q2 expectation was in line with its long-term target.

Key Picks

A few better ranked stocks from the Medical-Products industry include PetIQ, Inc. PETQ, National Vision Holdings, Inc. EYE and Envista Holdings Corporation NVST.

PetIQ,currently sporting a Zacks Rank #1 (Strong Buy), has a long-term earnings growth rate of 25.00%. You can see the complete list of today’s Zacks #1 Rank stocks here.

National Vision Holdings, which carries a Zacks Rank #1, has a long-term earnings growth rate of 23.00%.

Envista Holdings, which carries a Zacks Rank # 2 (Buy), has a long-term earnings growth rate of 26.40%.

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