Why SmileDirectClub Tanked by 24% on Tuesday

What happened

SmileDirectClub (NASDAQ:SDC) was anything but happy on Tuesday. A disappointing earnings report wiped the grins off investor faces, with the stock price cratering by slightly over 24% on the day.

So what

For its second quarter, the results of which were published Monday after market hours, SmileDirectClub booked $174 million in revenue, which was nearly 63% higher compared with the same period last year. It also managed to trim its bottom-line generally accepted accounting principles (GAAP) loss; it was just shy of $16.9 million, or $0.14 per share, against Q2 2020’s $26.8 million shortfall.

Frowning woman.

Image source: Getty Images.

While improvements are always welcome, those numbers didn’t meet analyst expectations. Collectively, prognosticators were anticipating higher revenue (nearly $198.5 million) and a narrower net loss ($0.10 per share).

Referring to a damaging hack SmileDirectClub experienced in April, company CFO Kyle Wailes said, “The short-term headwinds from residual impacts of the April cyber-attack, the lasting economic effects from COVID on our target demographic and the slower scaling of some of our new international markets due to COVID prevented us from achieving our anticipated second quarter results.”

Now what

SmileDirectClub obviously feels it will get past these obstacles; it’s forecasting $750 million to $800 million in revenue for the entirety of 2021, well up from the nearly $657 million of 2020. No net profit guidance was provided. Meanwhile, the former range falls well short of the almost $834 million average analyst estimate. 

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Stocks, of course, trade on future potential rather than trailing results. Given that, plus those Q2 misses, it’s not surprising that the stock fell so hard on the day.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

View more information: https://www.fool.com/investing/2021/08/10/why-smiledirectclub-tanked-by-24-on-tuesday/

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