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A Beaten Down Dog that Will Make You Smile – $SDC DD

It’s me again, bringing you your next ticket to the moon next to Jeff Bezos.

Today’s pick is a beaten-down stock, and looks like it’s poised for a massive recovery. In this market, where everything seems to go up, there still remain opportunities and this stock is a prime example of that, I’m talking about $SDC, Smile Direct Club.

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SDC essentially competes with Invisalign in braces. They make aligners to straighten your teeth, nothing too fancy. You can’t use their products for the most complicated cases, but works great for milder cases. However, their pricing clearly undercuts traditional braces and reduce the cost of wearing traditional braces ($5’800 on average for braces to $1950)

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SDC **dropped 25%** just yesterday after earnings. They reported

* $174m or **62.7% growth** year over year
* Net loss of $(55)m or an **improvement of 41.6%** year over year
* Adjusted EBITDA of $(22)m, a **decrease of $2m** year over year
* Diluted EPS of $(0.14), a **44% improvement** year over year

These numbers are great especially considering the extremely cheap valuation and all the headwinds the company faced last year. Most of the issues they faced are one-off expenses and the company is slowly going to get to profitability. Keep in mind that this isn’t your typical Pump and Dump ultra high growth stock, this is a **value play.**

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On their earnings call they said that they were negatively impacted by a cyber attack in April, the lasting economic effects of COVID-19, and the slower scaling of international markets due to COVID. However, they are planning to relaunch in Germany and Spain this year and will resume focus on acquiring new customers. This is essentially a new chapter for their business, as they are going to be more aggressive on their customer acquisition and expansion into new markets.

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It’s important to note that the long-term story for SDC is intact and looks very promising, as they turn their business around to avoid these short-term one-off issues. SDC has a vertically-integrated platform and a very unique way of operating that prevents any other competitors from stealing their business. This is crucial to their business and is what will eventually allow them to grow profitably.

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Short-sellers seem to have forgotten the long-term growth story of SDC and have just thrown away the stock, and this down move is unjustified, as the future is very bright for SDC. Analysts have all come out and downgraded the stock which pushed prices down even more. The company is expected to grow about 20% this year and 24% in 2022. For a value play, have you ever seen numbers like that, this is not your average boomer stock. I can clearly see a path where this company becomes profitable this year, as they really seem to have shifted focus on **growing profitability.**

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They could clearly receive a buy-out from Align technologies or another healthcare company. At this valuation, I think major health care companies, manufacturing companies are seriously doing due diligence on SDC. I would clearly see P&G or another conglomerate getting interested in SDC at these prices.

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Positions:

60x 5$ Calls

10000 Shares

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**TLDR: $SDC just got slammed on earnings yesterday and dropped 25% to $5. $SDC is a great value play at this cheap valuation. As they shift their focus towards profitability, the recovery to $10. Hop aboard with dirt-cheap calls.**

EDIT: There seems to be some controversy among dentists about SDC products, please be careful and read u/TheFatOneKnows comment to learn more. Thanks for pointing this out and trade carefully

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46 Comments

  1. Dentist here. This company is super unethical as no doctor oversees the treatment process and we were extracting teeth left and right in dental school because of patients with gum disease doing SDC when they shouldn’t have ever been in treatment. From my understanding, they are constantly under litigation and the American Dental Association is fighting hard against them too. I can’t invest in this company in good faith but I figured I’d just mention my perspective and encourage researching further.

  2. Probably will see a bounceback but it seems like they might be getting reamed in the market by $ALGN and Byte. Align grew 13% quarter over quarter which makes the earnings that much weirder given they said that the cyber attack was only a $9mm hit to revenue. Ontop of that they missed their quarterly guidance by $20mm but their full year guidance misses consensus by like $60mm so that probably spooked alot of people.

    That being said, I like their management and there are a ton of HFs shorting this off like website scrapes and credit card data. Might have to hold for a while before the fundamentals get better imo

  3. bunch of so called “dentist” trying to scare you off of new technology they dont understand. Ofcourse its bad, they want to charge you thousands of dollars for their old age treatments. Whos gonna pay their bills if people start going with smile ? think about it.

  4. Most people who hate this stocks are like the taxi drivers who come out and protest Uber. It’s a disruptive to an existing industry. Anything that can be done directly to consumer and cut out the cost of middle men would win at the end. Ask mark cuban.

    At This price I am loading.

  5. I’m in it for a short term play. I read on a post, that’s since been deleted, that insiders tend to buy in when the stock is low. After earnings, the soonest they can is tomorrow. While I cannot confirm if this is true or not, I poked around and felt getting in today might be a good play. Thanks for the added confirmation bias OP!

  6. i really enjoyed their product and it worked well for me. however, there was no oversight despite me sending in photos of my progress. no one checked in, no one did anything except for try to sell me more shit. i’m glad i seemingly got lucky, but i don’t ever think i’d go through the treatment again or trust their company.

  7. A very important aspect you left out is that they are creating partnerships with Dental Offices & Orthos. Invisalign had sole patents with most Dental Offices & Orthos but they are now expiring and are not being renewed with Invisalign being the sole provider. In Q2 SDC gained 1,800 offices that will oversee the SDC process (unlike before where there wasn’t any professional supervision). That was a huge step for them and logistically makes SDC a competitor. I think in 3-5 years SDC will be the staple for minor/moderate cosmetic fixes for people who failed to wear a retainer after braces, or people with gaps that are easier to fix. Of course this could totally not happen, but given the model of the company and the new implementations they finally have some legs to stand on.
    SDC is definitely not a great company now, but they are overly attacked and I have to assume it’s by competing investors.
    I think SDC is primarily shorted bc of market sentiment, not because it’s actually a terrible company. There is just a good easy reason to short the stock. But given this it provides a perfect scenario to be squeezed.

  8. If you just google smile direct club reviews, you can see most reviews are 4.8+/5 with hundreds or thousands of reviews. I don’t know why a small number of people keep saying customer complaints. Don’t get it. A few paid bashers or thousands of paid reviewers? Huh?

  9. The same management went public with a direct to consumer contact lens company.

    Same hate, litigation and attacks by “medical professionals”, literally everyone was an “optometrist” talking about how they’d fail.

    They’re last contact lenses venture netted investors over 500% from IPO. 1800 contacts, look it up.

    Like all professional fields they are fearful of the new and they worry about losing a slice of the pie. Times are changing though, no worries.

    Invest, forget about it. Reap the rewards.

    Most people here are good at two things. Losing money and thinking they are intelligent…I’m no different!

  10. As a dentist wouldn’t touch this stock with a 10 foot pole. The lawsuits will keep coming until they learn how to deliver aligners without leaving patients with open bites, root resorption, cross bites, and other complications that are (usually) caught and corrected by dentist.

  11. Isn’t braces the most common and most expensive non invasive procedure you can get at a dentist? It’s like thousands of dollars and here come these companies that will do it for far less. Pretty easy to see why Dentists would be upset about this. It’s really cutting into their profits. I can’t tell you how many times a dentist tries to upsell me on all sorts of things when I go there. I don’t even feel like I’m at a doctors office, more like at an auto dealership or something. They even tried to sell me expensive mouth wash that costs $30 per bottle.

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