Recently, SmileDirectClub (NASDAQ:SDC) stock has come onto traders’ radars as a potential short-squeeze target.
This makes sense, as Reddit users sometimes like to pump up low-priced stocks with underdog status, and SDC stock certainly fits that description.
Actually, “underdog” isn’t even the best way to describe SmileDirectClub. The shares have been beaten down severely in 2021. Only the short sellers are smiling now, it seems.
InvestorPlace contributor Alex Sirois once called SDC stock a “flawed but fun squeeze play.” I tend to concur with his assessment, as the stock is volatile and SmileDirectClub is still working to achieve profitability.
However, there’s more to SmileDirectClub than the short-squeeze potential and the bottom-line challenges. Indeed, the company has demonstrated its ability to generate revenues. And right now, SmileDirectClub is venturing into a potentially lucrative international market.
A Closer Look at SDC Stock
SDC stock started off 2021 uneventfully at around $11.50. However, the past 10 months have been a rough ride for the investors.
A sell-the-pops strategy would have worked out quite well in 2021, actually. Every time the SmileDirectClub share price moved up, the sellers stepped in and pushed it right back down.
May was a particularly painful month as SDC stock fell below the crucial $10 level. It never recovered, and the share price is now around $6.60.
At this point, the shareholders are basically in damage-control mode. Still, value-focused investors might see a bargain here.
If SDC stock regains $10 in the coming months, that would definitely be a good sign. Just don’t get greedy if you’re holding the shares, as anything above $20 is uncharted territory.
A Loss, But Also Some Improvement
As a teeth-straightening platform, SmileDirectClub has brand-name recognition and generally positive word-of-mouth (pardon the pun) among its customers.
All of this seems to have translated into positive top-line results.
During 2021’s second quarter, SmileDirectClub generated total revenues of $174 million. That’s an improvement of 62.7% over the prior-year period.
Here’s the problem. In that same time frame, SmileDirectClub sustained a net earnings loss of $55 million.
Clearly, the company needs to address that situation. On the other hand, there is evidence that SmileDirectClub is working towards profitability.
Specifically, that second-quarter net earnings loss represents an improvement of 41.6% over the prior-year period.
Moreover, the company’s quarterly diluted earnings per share of -14 cents represents a 44% improvement year-over-year improvement.
In other words, we can choose to view the glass as half-empty or half-full. And in the same way, we can see SDC stock as a toxic asset or as an under-appreciated gem.
Straightening Smiles in Europe
Perhaps SmileDirectClub path to profitability will be paved not within America’s 50 states, but internationally.
In particular, SmileDirectClub is making strides in its efforts to commercialize in Europe.
For instance, the company is introducing its premium clear aligners, whitening system and telehealth platform at SmileDirectClub’s first France SmileShop in Paris, with additional locations to follow.
This event marks the company’s entry into its seventh European country.
All in all, SmileDirectClub is truly a multi-national business as it has straightened smiles for more than 1.5 million customers in Europe, North America and the Asia-Pacific region.
Why choose France for the company’s latest European venture? According to the SmileDirectClub’s research, around 80% of French consumers say that they have room to improve the straightness of their teeth, yet cost is the biggest barrier.
SmileDirectClub’s expansion into the French market should help to bridge that gap (so many puns, so little time). That’s because the company’s teeth-aligning product costs 60% less than braces.
The Bottom Line
SDC stock isn’t a market darling, that’s for sure.
Yet, there’s a growth story in progress here. In 2021, SmileDirectClub is working diligently to turn its revenues into a positive bottom-line result.
SmileDirectClub’s foray abroad should help the company achieve profitability. With that, dental care could become more affordable. And the SDC stock bulls can finally show their teeth.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
