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Why SmileDirectClub Stock Is Falling 24% This Week

By Cory Renauer – Aug 13, 2021 at 10:15AM

Key Points

  • SmileDirectClub's lower-cost alternative to Invisalign isn't resonating with consumers.

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Second-quarter earnings show the company's competition with Align Technology has gone completely lopsided.

What happened

The stock of SmileDirectClub (SDC -3.49%) is tanking after a dismal second-quarter earnings report and hasn't recovered. At the end of the trading session on Thursday, the stock was down 23.9% for the week.

So what 

SmileDirectClub markets a lower-cost alternative to Align Technology's (ALGN -0.82%) Invisalign brand of clear aligners. The stock tanked this week because management reported another quarter marked by top-line stagnation and losses on the bottom line. 

Investor at home looking at a downward sloping stock chart.

Image source: Getty Images.

Total revenue came in 63% higher than the previous year period at $174 million, but this was $24 million less than the company reported in the first quarter of 2021. It was even less than the company reported in the second quarter of 2019.

Now what

On the bottom line, SmileDirectClub lost $55 million, which is especially upsetting because it recognized $1,885 per case shipped. Align Technology's clear aligners are more expensive for consumers because Align sells them to dentists and orthodontists, who mark up the price and pocket the difference.

In the second quarter, Align Technology recognized an average sales price of just $1,030 for non-comprehensive products that require less interaction with a dentist, and $1,285  for comprehensive products less likely to compete with SmileDirectClub's aligners. This leaves plenty of room for dentists to add a markup without driving their cost-conscious patients into the arms of SmileDirectClub.

Despite recognizing far less revenue per customer, Align Technology keeps reporting a strong profit it can use to extend its lead. Don't be surprised if upcoming earnings calls for SmileDirectClub continue to disappoint.

Cory Renauer 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.
$0.62 (-3.49%) $0.02
Align Technology Stock Quote
Align Technology
$194.67 (-0.82%) $-1.61

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