SmileDirectClub Inc’s stock surged 17% on Wednesday, bringing its gain to 35% in two days, following the online orthodontics company’s announcement that it would sell its aligners directly to orthodontists.
The money-losing company, whose shares have floundered since its public listing last year, said early on Tuesday it would provide its clear aligners to dentists and orthodontists, in addition to its current practice of selling them directly to consumers through virtual consultations.
As well as opening a new distribution channel, selling to orthodontists could defuse scrutiny from the “dental establishment,” Jefferies analyst Brandon Couillard wrote in a client note on Wednesday.
The company has faced legal challenges from consumers and dental professionals. It warned in its prospectus that dental associations have made statements discouraging orthodontics over a remote platform and warned that its business could be affected by legal challenges to its business model, or by future regulations.
SmileDirectClub said it became free to sell to orthodontists and dentists after an agreement with rival Align Technologies, which manufactured clear aligners for SmileDirectClub, expired last month. Shares of Align Technologies have lost almost 7% since SmileDirectClub’s announcement.
SmileDirectClub was one of several unprofitable companies with multibillion-dollar valuations whose stock prices sank after heavily promoted IPOs last year. Even after this week’s rally, SmileDirectClub’s stock is down 40% from its IPO price.
Last week, SmileDirectClub said it would sell products including an electric toothbrush and a teeth-whitening kit at Walmart.
Ten analysts recommend buying SmileDirectClub’s stock, while one analyst has a neutral rating and one recommends selling, according to Refinitiv.