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Why Shares of SmileDirectClub Soared This Week

Motley Fool - Fri Aug 4, 2023

What happened

Shares of SmileDirectClub(NASDAQ: SDC) were up by more than 32% for the week as of Friday at 12:30 p.m. EDT, according to data provided by S&P Global Market Intelligence. The oral care company with a medtech platform for teeth-straightening closed last week at $0.70 a share, then climbed as high as $1.09 on Tuesday. The healthcare stock is up more than 162% so far this year.

So what

The company's shares gained traction from two sources. The first was an earnings surprise by competitor Align Technology this week, where the maker of Invisalign braces said quarterly revenue was $1 billion, up 3.4%, year over year, and earnings per share (EPS) was $2.22, up from $2.15 in the same period last year. With Align buoyed by market forces that saw more young people getting braces, the thought was that SmileDirectClub would likely have improved numbers when it reports its second-quarter earnings on Aug. 8.

The other factor was that some retail investors may be attempting a short squeeze, as SmileDirectClub's shares have a 21.3% short interest.

Now what

The company had been in danger of being delisted from the NASDAQ because it had been consistently trading under $1. With its rise, the company's chances of being delisted from the NASDAQ diminish. That means the stock is more likely to be picked up by mutual funds and exchange-traded funds (ETFs).

SmileDirectClub is already coming off improved first-quarter earnings, announced on May 9. The company said then that revenue for the quarter was $120 million, up 38.4% year over year, and it had narrowed its net losses to $66 million, an improvement of $4 million from the previous quarter and $7 million from the first quarter of 2022.

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Jim Halley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Align Technology. The Motley Fool has a disclosure policy.

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