2 Takes On SmileDirectClub's First Quarterly Print As Public Company

SmileDirectClub Inc SDC reported third-quarter results Tuesday that were "good enough" in one Street analyst's view, while another found fault in management's fourth-quarter outlook.

The Analysts

Bank of America Merrill Lynch analyst Michael Ryskin maintained a Buy rating on SmileDirectClub with a $19 price target.

Credit Suisse analyst Erin Wilson Wright maintained at Outperform, price target lowered from $18 to $17.

BofA: 'Good Enough'

SmileDirect's first-ever earnings report as a public company was "likely sufficient" to provide relief to the stock, Ryskin said in a Wednesday note.

For example, the company shipped 106,000 aligner cases versus estimates of 97,700, which helped total revenue of $180 million come in ahead of expectations of $164 million.

The company reiterated its belief that it sees zero risk from California's AB-1519 dental bill despite "continued noise" from dental boards nationwide, the analyst said.

SmileDirect also reaffirmed its prior long-term EBITDA and margin targets and said it still expects higher level of SG&A spend to yield benefits in 2020 and create leverage in the business model.

See Also: 'Meaningful First-Mover Advantage': SmileDirectClub Analysts Sound Optimistic Note After Rough First Month

Credit Suisse: Light Q4 Guide

SmileDirectClub's full-year 2019 EBITDA guidance of a loss of $73 million to $80 million implies weaker-than-expected performance in the fourth quarter, Wilson Wright said in a Wednesday note.

Investors can now expect "more subdued" performance in the fourth quarter due to heightened legal spending and the delayed opening of its Texas facility, the analyst said. 

Despite shares of SmileDirect falling more than 50% since its September initial public offering, Tuesday's third-quarter report is "not enough" to help the stock, she said.

Yet the company's reiteration of its longer-term EBITDA margin guidance of 25% to 30% is an "encouraging dynamic," Wilson Wright said. 

Finally, SmileDirectClub's stock is trading at 3.3 times 2020 estimated EV/sales, which is "well below" its competitor Align Technology, Inc. ALGN at 6.8 times, according to Credit Suisse. 

Price Action

Shares of SmileDirectClub were trading 20.08% lower at $8.86 at the time of publication. 

Photo courtesy of SmileDirectClub.