PreMarket Prep Stock Of The Day: SmileDirectClub

Benzinga's PreMarket Prep airs every morning from 8-9 a.m. ET. During that fast-paced, highly informative hour, traders and investors tune in to get the major news of the day, the catalysts behind those moves and the corresponding price action for the upcoming session.

On any given day, the show will cover at least 20 stocks determined by co-hosts Joel Elconin and Dennis Dick along with producer Spencer Israel.

For those who don't have the time to tune in live or listen to the podcast, Benzinga will highlight one stock that merits further discussion. This analysis is not a buy or sell recommendation.

In the 2019 IPO market, there were certainly some success stories and there were a fair share of disasters. One of those disasters has been mounting a comeback over the last month.

That issue is SmileDirectClub SDC.

Investors Grinding Their Teeth From The Start

SmileDirectClub is a teledentistry company founded in 2014. Its clear aligners are a substitute for braces and the product is marketed at a steep discount in price to braces and can be done at home in a 4-6 month period.

Any investor in SmileDirectClub from day one experienced nothing but pain.
After its first print on Sept. 12, 2019 at $20.55, it had a brief pop to $21.10, but ended that month at $13.89. Its year-end closing price of $8.74 was down 60% from its all-time high.

Early 2020 Performance Turns Frowns Into Smiles

Sentiment in the issue turned positive when on Jan. 6, the company launched a line of oral care products for Walmart WMT. That news instigated a 22% jump from $8.38 to $10.19.

In mid-January the technical and fundamental rebound was aided by the announcement the company was planning to offer its products through wholesale channels. As a result, dentist and orthodontists will be able to offer an in-office option.

The momentum off that news did not subside until it peaked on Feb. 13 at $15.54.

So Goes The Market, So Goes SDC On The Downside

While the S&P 500 index retreated 35% from its February peak to March trough, SDC swooned 76% during the same time period. If the decline was figured from its all-time high, the retreat was 83%.

The S&P 500 index bottomed on March 23 and a few trading sessions earlier, SDC put in a pair of lows at the $3.70 area. It did not make its ultimate bottom until April 3, when it fell to $3.64.

Today's rebound high of $8.28 represents a 127% bounce off that low, which has outgained the 50% rebound in the broad market.

News Driven Rally

Last week, the company was granted a patent for a SmileShop Retail Concept and Treatment Process as their shops plan to open. Before today's open, it announced that it increased its dental care access with the major U.S. payers such as Aetna and Anthem Blue Cross Blue Shield.

Over the past week, SDC has appreciated from its April 27 close ($5.39) to $8.28 earlier in today's session. It backed off that high into the mid-$7 handle at time of writing this article.

Moving Forward

It's hard not to be cautious on the company in view of it price and earnings performance since the IPO. While SmileDirectClub's price action has been detailed, its two earnings reports have been polar opposites. Its initial report showed a modest beat for EPS and revenues while the second report came up shy on both measures.

On May 13, the company will announce first-quarter results, if the company can replicate its inaugural report, it may indicate a sign of potential profitability. If not, its overall poor price performance since its IPO may continue.