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Why SmileDirectClub Stock Lost 38% in March

By Jeremy Bowman - Updated Apr 6, 2020 at 1:28PM

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Shares of the teledentistry company fell on the spreading coronavirus outbreak.

What happened

Shares of SmileDirectClub (SDC 5.71%) were heading lower last month as the teledentistry specialist got swept up in the coronavirus-driven sell-off. SmileDirectClub came in to the month falling sharply on weak fourth-quarter earnings, and the negativity around the spreading pandemic seemed to push the stock down further.

As a teledentistry provider, SmileDirectClub may seem poised in some ways to thrive during a period of social distancing, but the company does have some brick-and-mortar storefronts and still relies on dentists to a degree. Additionally, its procedures are generally elective, and customers may be holding back on spending on dental aligners at a time of economic uncertainty.

According to data from S&P Global Market Intelligence, the stock finished the month down 38%. As you can see from the chart below, shares were highly volatile during the month.

^SPX Chart

^SPX data by YCharts.

So what

SmileDirectClub shares fell sharply in the second week of the month as the coronavirus outbreak pushed schools to close in several states and businesses to direct people to work from home where possible.

That same week, the teledentistry company's lockup period also expired, giving inside investors a chance to sell for the first time. That event seemed to push shares down lower than they might have otherwise gone as the stock fell sharply toward the end of the week on high volume.

That same week, it also announced a pilot to open "SmileShops" in Walmart Canada, though that news may have been poorly timed given the spread of the pandemic. 

A pair of dental aligners from SmileDirectClub

Image source: SmileDirectClub.

Toward the end of the month, the stock bounced back on news that the company would make face shields for medical personnel. It said through 3D-printing, it had the capacity to make 7,500 shields a day, opening up another potential revenue stream during the crisis.

Management said it continued to fulfill orders for aligners and retainers, but it has shifted a significant proportion of its 3D-manufacturing capabilities to produce face shields. 

Now what

The teledentistry stock has continued to fall through the beginning of April as Americans prepare for the outbreak to peak and react to skyrocketing unemployment numbers. 

In an April 3 update, the company said it would extend all SmileShop closures through at least through May 3 in all markets except Hong Kong. To save money, the company will suspend most of its marketing spending starting April 6 and furlough its headquarters and retail staff.

That update makes it clear that SmileDirectClub, like many companies, is being directly affected by the COVID-19 outbreak. It also withdrew guidance, indicating the company is unlikely to accomplish its goal of turning a profit by the end of the year.

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Stocks Mentioned

SmileDirectClub, Inc. Stock Quote
SmileDirectClub, Inc.
SDC
$1.11 (5.71%) $0.06
Wal-Mart Stores, Inc. Stock Quote
Wal-Mart Stores, Inc.
WMT
$123.72 (0.08%) $0.10

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