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SmileDirectClub Cut at J.P. Morgan as Guidance Misses Forecast

SmileDirectClub falls as J.P. Morgan downgrades the stock, seeing 'less potential upside over the next 12 months.'
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SmileDirectClub  (SDC) - Get SmileDirectClub, Inc. - Ordinary Shares - Class A Report shares on Tuesday were downgraded by analysts at J.P. Morgan and other investment firms after the oral-care company posted mixed first-quarter results and soft guidance.

Shares of the Nashville company at last check were down 5.5% at $7.53. The stock had dropped 5% on Monday.

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SmileDirectClub reported a quarterly loss of 25 cents a share, or an adjusted loss of 12 cents a share. FactSet's consensus analyst estimates were a GAAP loss of 18 cents a share, or an adjusted 13 cents.

Revenue came in at $199.5 million, beating the FactSet consensus estimate of $197.3 million.

J.P. Morgan analyst Robbie Marcus downgraded the company's stock to neutral from overweight and slashed his price target to $10 a share from $14. 

Marcus said in a research note that the company's guidance for sequential 5% to 7% revenue growth off a depressed second quarter indicates sales of $820 million to $836 million for 2021, below Wall Street's call for $851 million. 

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SmileDirectClub shares earlier this month took a beating after the company said an April cyberattack could cost it as much as $15 million of revenue.

"With mixed execution, a potentially lingering impact from the cybersecurity attack, and a seemingly slower-than-expected new aligner ramp into the recovery, we see less potential upside over the next 12 months vs. our coverage universe," he said.

Jefferies analyst Brandon Couillard, who has a hold rating on SmileDirectClub, cut his price target to $9 from $10. He also cited management's revenue growth projections. 

The analyst wrote that "investors may be disappointed by increased sales and marketing spend in the first quarter with management citing [5% to 7% quarter-to-quarter] revenue growth in [the] third quarter/fourth quarter, despite coming off a depressed second-quarter base impaired by the recent cyberattack," according to Bloomberg.

Credit Suisse analyst Erin Wilson Wright said that while there was "no earth-shattering news with the first-quarter report ... several questions linger following the call around why [the third quarter] may not see a more meaningful sequential recovery following the seemingly one-time nature of the cyber incident, SDC’s broader North America opportunity ... more tangible traction across its various acquisition channel strategies, and marketing-spend dynamics."

The analyst, who has a $13 price target on the stock, added that "SDC still remains highly levered to greater adoption across a large underserved [direct-to-consumer] clear-aligner market, contributing to our outperform" rating.

SmileDirectClub went public in September 2019, raising $1.3 billion in gross proceeds from an IPO.

In April 2020, the company said it had received a patent for its SmileShop concept and process.