SmileDirectClub Suspends Operations in Several Countries; Shares Rise 11.1% After-Hours

With an aim to focus on countries that have the greatest potential to achieve short-term profitability, Tennessee-based teledentistry company SmileDirectClub, Inc. (NASDAQ: SDC) has announced the suspension of operations in Mexico, Spain, Germany, the Netherlands, Austria, Hong Kong, Singapore and New Zealand. The company will continue to boost its presence in the U.S., Canada, the U.K., Ireland, France and Australia.

Following the announcement, SDC stock jumped 11.1% in the after-hours trading session on Monday. The stock had gained 2.1% during the market hours to close at $1.99.

SmileDirectClub’s CEO, David Katzman, said, “These steps reflect our commitment to optimizing our investments in those initiatives that are expected to bring sustainable long-term revenue growth, driving improved profitability to our business model and right-sizing the organization to support these programs.”

“We believe these initiatives are the right strategy for the future of SmileDirectClub by stabilizing the balance sheet and having sufficient cash to operate and invest in the business. We look forward to providing more detail on our progress in our fourth-quarter earnings release and conference call,” Katzman added.

The company’s upcoming earnings report for the fourth quarter and full-year 2021 is scheduled to be released on March 2, 2022.

Cost Savings and Guidance

SmileDirectClub expects to generate cost and capital savings of around $120 million this year. It also expects to record one-time reorganization costs of nearly $25 million between the fourth quarter of 2021 and 2022.

Additionally, the company has reaffirmed the guidance for full-year 2021. It continues to expect revenue to range from $630 million to $650 million.

Wall Street’s Take

Recently, Credit Suisse analyst Matt Miksic maintained a Buy rating on the stock and lowered the price target to $4 from $11 (101% upside potential).

In a research note to investors, the analyst said, “SmileDirectClub’s growth and margins have been impacted by a series of headwinds in 2021, but increasing brand awareness, steady referral rates and its partner network expansion all support the view that this high-growth disruptive growth story can get back on track.”

Overall, the stock has a Hold consensus rating based on 1 Buy, 5 Holds and 3 Sells. The average SDC stock forecast of $4.38 implies 120.1% upside potential. Shares have lost 86.3% over the past year.

Blogger Opinions

TipRanks data shows that financial blogger opinions are 77% Bullish on SmileDirectClub, compared to the sector average of 70%.

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