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Why SmileDirectClub Stock Skyrocketed 53.2% in January

By Steve Symington – Feb 11, 2020 at 8:30AM

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A new deal with Walmart and plans to take market share from Invisalign gave investors reason to cheer.

What happened

Shares of SmileDirectClub (SDC 3.92%) climbed 53.2% in January, according to data from S&P Global Market Intelligence, driven by a combination of a new retail partnership with Walmart (WMT -2.50%) and the expiration of its previous exclusive supply agreement with Align Technology (ALGN 2.06%).

To be sure, SmileDirectClub stock jumped more than 17% on January 6 alone, after the company announced its launch of oral care products available exclusively at Walmart -- a deal it noted made it "the first provider of clear aligner therapy to offer oral care products in mass retail."

A man in a shirt and tie pointing up and standing in front of a wood arrow that's pointing up

IMAGE SOURCE: GETTY IMAGES.

So what

To be clear, those oral care products at Walmart do not include SmileDirect's flagship clear aligners, but rather span everything from toothpastes to a water flosser system, teeth whitening kits, and an electric toothbrush. Even so, investors rightly cheered what will likely represent a significant source of incremental revenue.

If that wasn't enough, shares continued to rally nearly 15% higher on January 14, followed by a roughly 17% pop on January 15 after SmileDirectClub announced plans to sell its clear aligners to dentists and orthodontists. In particular, the move showed that SmileDirectClub wasn't wasting any time expanding its reach following the December 31, 2019, expiration of its previous exclusive supply agreement with Invisalign parent company Align Technology.

Now what

Of course, it remains to be seen how quickly these initiatives will translate to accelerated top-line growth for SmileDirectClub. And we still don't know the extent to which this consumer discretionary company may opt to forsake profitability in the near term in order to gain market share against current industry incumbents like Align Technology. 

Investors will receive more clarity on that when SmileDirectClub releases its fourth-quarter 2019 results on February 25, 2020. In the meantime, though, it was hardly surprising to see the stock rallying so hard in response last month.

Steve Symington has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Align Technology. The Motley Fool has a disclosure policy.

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Stocks Mentioned

SmileDirectClub, Inc. Stock Quote
SmileDirectClub, Inc.
SDC
$1.06 (3.92%) $0.04
Walmart Stock Quote
Walmart
WMT
$130.06 (-2.50%) $-3.33
Align Technology, Inc. Stock Quote
Align Technology, Inc.
ALGN
$222.43 (2.06%) $4.48

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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