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Why SmileDirectClub Stock Is Sinking Today

By Keith Speights – Aug 13, 2020 at 11:46AM

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Mixed Q2 results and an uncertain outlook due to COVID-19 are weighing on the teledentistry stock.

What happened

Shares of SmileDirectClub (SDC -6.55%) were sinking 14.8% lower as of 11:21 a.m. EDT on Thursday. The decline came after the teledentistry company announced mixed second-quarter results following the market close on Wednesday.

So what

The COVID-19 pandemic hit SmileDirectClub hard in Q2. The company reported a 45% year-over-year revenue decline. Its net loss in the second quarter of $95 million was much worse than the $32.4 million loss in the prior-year period.

Hand holding clear dental aligner.

Image source: Getty Images.

Still, though, SmileDirectClub managed to beat analysts' top-line estimates with revenue of $102 million in Q2, well above the consensus estimate of $84.2 million. The problem came on the bottom line. SmileDirectClub's net loss of $0.25 per share wasn't anywhere close to the net loss of $0.14 per share expected by analysts.

Why did SmileDirectClub miss Wall Street earnings estimates so badly? Mainly because of one-time charges related to lease abandonment, impairment of long-lived assets, other related charges, and a loss on the extinguishment of debt. The company would have posted a net loss in Q2 of $0.13 per share were it not for these charges.

Now what

The big question for the healthcare stock now is: How much longer will the COVID-19 pandemic negatively impact its growth? No one knows the answer to that question for sure. However, SmileDirectClub still thinks it will be able to achieve its goal of generating positive adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) by the end of 2020.

Keith Speights has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Stocks Mentioned

SmileDirectClub, Inc. Stock Quote
SmileDirectClub, Inc.
$0.56 (-6.55%) $0.04

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