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PreMarket Prep Stock Of The Day: SmileDirectClub

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PreMarket Prep Stock Of The Day: SmileDirectClub

Benzinga's PreMarket Prep airs every morning from 8-9:00 a.m. EST. During that fast-paced highly informative hour, traders and investors tune in to get the major news of the day, the catalysts behind those moves and the corresponding price action for the upcoming session.

On any given day, the show will cover at least 20 stocks determined by co-hosts Joel Elconin and Dennis Dick along with producer Spencer Israel.

For those who don't have the time to tune in live or listen to a recording, Benzinga will highlight a stock of the day that was featured on the show.

Stock Of The Day: SmileDirectClub

On many occasions, the way an issue trades off its IPO is a precursor to the price action moving forward. After all, it's very difficult for underwriters to price a new company at a level that will be low enough to attract buyers and not so high that it attracts sellers looking to book a profit.

Disaster From The Start

Any investor in SmileDirectClub (NASDAQ: SDC) from day one has experienced nothing but pain. After its first print on Sept. 12 at $20.55, it had a brief pop to $21.10 but then swooned all the way to $16.28 and ended that session at $16.67. It attempted to rebound over the next few days but was never able to clear the $20.00 level, peaking at $19.70 and resumed its painful move lower.

Following some large moves lower and a few mini-rallies, it didn't bottom until Dec. 12 at $7.56. After making four consecutive lows in that area, it embarked on a major rebound and peaked on Feb. 13 at $15.54.

Catalysts For The Rebound

After creeping over $9 in early January, SmileDirectClub had two positive catalysts on back to back days that accounted for a good portion of the gains for the entire rebound.

On Jan. 13, the company scored a victory over the New Jersey Dental Association that induced a move from its previous day close of $9.22 to $10.20. The following day, the company announced plans to offer clear aligners through Wholesale Channel. As a result, it would provide dentists and orthodontists an in-office option in 2020.

That lifted the issue to $13.72 on Jan. 15, catching the attention of momentum investors as the issue leaped higher on much higher than average volume. The continuation lasted another month until it peaked on Feb. 13 at $15.54.

Negative Catalyst And Time To Exit Ahead Of Earnings

Just as positive news pushed the issue higher, negative news took it down. On the night it peaked, NBC News reported the company has allegedly hurt some of its customers, causing broken teeth and nerve damage. The following day after a modestly lower open, it cascaded from $15.33 to $12.83. The combination of a weak market and investors being nervous over its earnings report put the issue at $11.33 on Tuesday.

After Tuesday's close, SmileDirectClub announced a fourth-quarter EPS miss of 16 cents along with a sales miss of $16 million -- not exactly what the Street wanted from a new company in a down market.

Following a much lower open ($$8.49 vs. Tuesday's close of $11.33), it had a brief pop to $8.60, fell to $8 and is attempting to rebound. For those investors lamenting not buying the issue at $8 or in the area of its all-time low ($7.56), you're now presented with that opportunity.

 

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