Cramer Talks Thursday's SmileDirectClub IPO, Gives Buying Advice

SmileDirectClub Inc SDC is a "disruptor" orthodontic company and its Thursday IPO had true potential -- if not for the high price tag, according to CNBC's Jim Cramer.

What Happened

SmileDirect priced its IPO at $23 which was above the already "aggressive" proposed range, Cramer said during his Friday "Mad Money" show. The stock went on to open at just $20.55 per share, which implies an instant loss of 10% to investors who got in on the deal. But the trading action only got worse as shares closed below $17.

The stock recovered some of the losses on Friday but remained notably below its debut, Cramer said. This marks a "demoralizing" start to the company which not only offers a compelling solution to a real problem but is cheaper and more convenient than its rivals.

Why It's Important

SmileDirect offers a perfect trifecta for today's millennial as it is cheap, convenient, and makes them look better in selfies posted to Instagram, Cramer said. But at the end of the day $23 per share is way too high of a price and even at $18 the valuation implies 8.5 times this year's sales estimate which is too big of a premium for what the company offers.

"SmileDirectClub isn't some kind of cloud-based software company, doesn't have some sort of fantastic recurring business revenue model," Cramer said.

"It's basically in the same business as Align Technology, Inc. ALGN although given that Align is actually profitable, it's not quite fair to compare the price to sales model."

What's Next

SmileDirect will continue operating in an environment that is merely growing in terms of competition. It will be very hard to recommend the stock and investors shouldn't pay "more than $16 and change for it," Cramer said.

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