SmileDirectClub (NASDAQ: SDC) Stock Jumps 14.51% Despite JPMorgan Downgrading It To “Neutral”

SmileDirectClub (NASDAQ: SDC) stock jumped 14.51%, which is the highest single-day gain since January, but the shares are still 30.2%  lower in the year, underperforming competitor Align Technology (NASDAQ: ALGN)  which gained 1.6%. 

JPMorgan downgraded SmileDirectClub stock

JPMorgan recently downgraded SmileDirectClub from “Overweight” to “Neutral,” citing its worse than anticipated guidance. Also, JPMorgan lowered the price target from $14 to $10 per share. Analysts lead by Robbie Marcus say that the implied sales guide for 2021 is below the Wall Street estimates, reflecting the impact of the recent cybersecurity event, with the business predicting a sequential rise of 5–7% in Q2.

Analysts estimate the stock to have limited upside over the next 12 months relative to the firm’s covered universe due to slower-than-expected new aligner growth, uneven performance, and the impact of a cybersecurity breach.

In Q1, the company reported total revenue of $199 million, which was 8% QoQ growth and EPS of $0.25, a YoY improvement of 11%. The company now expects Q2 revenue to be around $195-$200 million, with EBITDA breaking even as SmileDirectClub recovers from cybersecurity incidents and continues to expand into international markets.  At the beginning of Mat, the cybersecurity incident forced SmileClubDirect to project a $10-15 million revenue impact in Q2 2021. 

Analysts have mixed views on SmileDirectClub stock

Interestingly, there are mixed views regarding the stock from Seeking Alpha contributors, with two analysts giving a neutral and bullish rating over the last 90 days. The Value Trend believes that the company is worth $16.0 per share, citing that it is better positioned to attain growth and profitability projections. 

On the other hand, William Blair analysts John Kreger has an outperform rating on SmileDirectClub, noting that the guidance shows a return to solid top-line growth and indications of margin progression despite disruptions that led to the revision of guidance. 

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