SmileDirectClub shares are down 4.5% in pre-market trading today even as the teledentistry company reported a better-than-feared loss for the third quarter and exceeded revenue expectations.
The company’s loss per share narrowed to $0.11 in 3Q20, compared to a loss per share of $0.89 in 3Q19. SmileDirectClub’s (SDC) revenue declined 6.5% year-over-year to $168.5 million, with unique aligner order shipments of 93,301. Analysts were expecting a loss per share of $0.14 on revenue of $146.2 million. Despite lower revenue, the company’s bottom line improved due to reduced marketing and selling expenses.
The company’s adjusted EBITDA came in at $3.0 million in 3Q20, compared to an adjusted EBITDA loss of $45.2 million in 3Q19. On the conference call, the company stated that it achieved EBITDA profitability one quarter ahead of its plan and is now focused on the long-term target of adjusted EBITDA margin of 25%-30%.
Looking ahead, the company expects to continue to see favorable industry dynamics with broader acceptance of telehealth and specifically teledentistry. The company anticipates favorable dynamics to accrue to more efficient customer acquisition costs as it pursues a 20%-30% annualized revenue growth target.
As for 4Q, SmileDirectClub expects unique aligner order shipments of 100,000 and revenue of $180 million, which reflects 7% sequential growth. (See SDC stock analysis on TipRanks)
Stifel Nicolaus analyst Jonathan Block recently reiterated a Buy rating on SmileDirectClub and increased his price target to $14 from $11, based on his 2021 and 2022 expense assumptions and EBITDA estimates. Block feels that while the company has talked more about “controlled growth,” it will still need to make significant progress on its expenses to materially ramp EBITDA in 2021 and 2022.
The Street currently has a cautiously optimistic outlook on SmileDirectClub. Its Moderate Buy consensus is based on 2 Buys and 1 Hold. Shares have risen 14.2% year-to-date and the average price target of $11.33 implies an upside potential of 13.8% over the coming months.
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