News Flash: 9 Analysts Think SmileDirectClub, Inc. (NASDAQ:SDC) Earnings Are Under Threat

One thing we could say about the analysts on SmileDirectClub, Inc. (NASDAQ:SDC) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Revenue and earnings per share (EPS) forecasts were both revised downwards, with the analysts seeing grey clouds on the horizon. Surprisingly the share price has been buoyant, rising 28% to US$1.73 in the past 7 days. It will be interesting to see if the downgrade has an impact on buying demand for the company's shares.

After the downgrade, the consensus from SmileDirectClub's nine analysts is for revenues of US$491m in 2022, which would reflect an uneasy 9.4% decline in sales compared to the last year of performance. Losses are forecast to narrow 6.7% to US$0.77 per share. Yet before this consensus update, the analysts had been forecasting revenues of US$616m and losses of US$0.53 per share in 2022. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a serious cut to their revenue forecasts while also expecting losses per share to increase.

View our latest analysis for SmileDirectClub

The consensus price target fell 21% to US$1.28, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values SmileDirectClub at US$2.00 per share, while the most bearish prices it at US$0.90. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. Over the past three years, revenues have declined around 5.0% annually. Worse, forecasts are essentially predicting the decline to accelerate, with the estimate for an annualised 18% decline in revenue until the end of 2022. Compare this against analyst estimates for companies in the broader industry, which suggest that revenues (in aggregate) are expected to grow 7.9% annually. So while a broad number of companies are forecast to grow, unfortunately SmileDirectClub is expected to see its sales affected worse than other companies in the industry.

The Bottom Line

The most important thing to note from this downgrade is that the consensus increased its forecast losses this year, suggesting all may not be well at SmileDirectClub. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. After such a stark change in sentiment from analysts, we'd understand if readers now felt a bit wary of SmileDirectClub.

Still, the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for SmileDirectClub going out to 2024, and you can see them free on our platform here.

Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.