February 26, 2020 / 2:47 PM / a month ago

SmileDirectClub's disappointing earnings cast doubt on growth prospects

Feb 26 (Reuters) - Shares of SmileDirectClub Inc slumped 25% on Wednesday after the online dental company’s dismal quarterly results and full-year revenue forecast left Wall Street analysts less confident in its ability to balance growth and profitability.

SmileDirectClub, which sells clear plastic dental aligners after virtual dental consultation, was one of several companies that went public last year with multibillion-dollar valuations, but have seen their stock prices plummet on concerns over growth.

The loss-making company, which has faced legal challenges from consumers and dental professionals, last month altered its strategy under which it would also sell its aligners directly to dentists.

For 2020, SmileDirectClub forecast sales between $1 billion and $1.10 billion, the mid-point of which was below market estimates, after it reported wider-than-expected fourth-quarter loss.

“While it likely has now set a more achievable bar, we view that the latest meager print and revenue/profit guide will not instill greater enthusiasm for the stock,” Credit Suisse analyst Erin Wright said.

SmileDirectClub shares were down 25% at $8.46, adding to the 32% drop since its market debut in September.

At least three brokerages cut their price target on the stock after the earnings report.

During a post-earnings conference call on Tuesday, the company said it would switch gears and focus on profitability instead of growth in 2020.

The company reported $318.5 million in cash at the end of the fourth quarter, indicating a cash burn of $180 million in the quarter, Jefferies analyst Brandon Couillard said.

Given the company’s accelerated cash burn, it may need additional capital sooner than expected, which could be an overhang on the stock, Couillard said.

Reporting by Manojna Maddipatla in Bengaluru; Editing by Anil D'Silva

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below