Despite its IPO disappointment, analysts argue the company shows promise.
Sometimes it’s a mystery why Wall Street prefers some stocks but not others. SmileDirectClub is an excellent example of this. The stock is considered a strong buy and has an average price target of $23.17, which represents a 57% upside.
And yet, the company was priced at $23 per share when it went public last month … and it still hasn’t hit this number. SmileClubDirect fell more than 10% on its first day of trading. The company also earned the dubious honor of having the fifth-worst IPO of 2019.
3 Reasons Analysts Are Bullish on SDC Stock
However, most analysts are bullish when it comes to the stock and argue that the company has potential. Listed below are three reasons why this is the case.
The Company Shows Promise
Out of the eight analysts that initiated SmileDirectClub on Monday, each one recommends buying shares of the stock. And the common thread among all these ratings is that analysts believe in the company’s growth story.
SmileDirectClub is still in its early stages of growth and is not yet profitable. But according to Bank of America analyst Michael Ryskin, we can expect to see “a long runway of continued strong sales growth” in the coming years.
SmileDirectClub Could Be a Market Disruptor
One of the unique things about SmileDirectClub is that it’s entering a virtually untapped market. The company offers clear plastic aligners that promise to straighten your teeth without traditional braces. The company’s product is an attractive option for most people, especially since it costs a lot less than braces.
According to JP Morgan, SmileDirectClub sets itself apart with its affordable products and convenient services. There is a large addressable market for the company’s services. After all, who wouldn’t want to skip out on two years of braces?
The Company Is Building a Vast Retail Network
If you’re looking to get started with SmileDirectClub, you can do so right away on the company’s website. But soon, you’ll be able to access the company’s products in stores as well.
SmileDirectClub is building out a large retail network, and the company’s aligners will soon be available in CVS stores across the country. Having an in-store offering could make it easier for many people to get started or learn more about what the process entails.
Headwinds Still Lie Ahead
In spite of Wall Street’s praise, SmileDirectClub does have many headwinds to deal with going forward. For one thing, the company will have to deal with ongoing regulatory issues. The American Association of Orthodontics takes issue with the company, claiming the company’s services violates the law.
The concern is that SmileDirectClub allows patients to skip orthodontist visits and X-rays. The organization claims this creates a medical risk and has filed regulatory complaints against the company in 36 different states.
Ultimately, we’ll know more about what we can expect from SmileDirectClub when it releases its first earnings report.
Jamie Johnson is a Kansas City-based freelance writer who writes about finance and business. She covers a variety of personal finance topics including trading, investing, loans, and credit. Jamie’s work has been featured on InvestorPlace, GOBankingRates, Yahoo Finance, and Business Insider.