Low stock prices can get even lower. We’ve seen that happen with the recent sharp correction in growth stocks. A lot of stocks that once had promise and momentum have fallen out of favor. Is that opportunity knocking or a door that should remain locked…
SmileDirectClub (NASDAQ:SDC), Root (NASDAQ:ROOT), and AMC Entertainment (NYSE:AMC) are all trading in the single digits. At one time they were wooing investors as disruptors, but now they’ve all shed more than half of their peak values as of Monday’s market close. Let’s see why they have a shot to bounce back.
1. SmileDirectClub: Down 51%
Dentistry and orthodontics are old-school industries ripe for disruption, so it was interesting and a bit unnerving for orthodontists when SmileDirectClub arrived on the scene. Using teledentistry and remotely generated teeth molds, SmileDirectClub offers a cheaper way to straighten teeth with clear dental aligners through a direct-selling model.
The pandemic was rough for many service and cosmetic industries, even though in retrospect it probably was the best time to fix one’s teeth when folks were donning masks. Sales growth finally turned positive after three quarters of negative top-line growth, and the runway is encouraging. SmileDirectClub sees an average of 20% to 30% in revenue growth through the next five years, approaching adjusted EBITDA margin of 25% to 30% by the end of that period. Investors aren’t smiling right now, with the stock a little more than half below its January all-time high, but they should get the last laugh as stimulus checks and money saved during the downturn get put to good use in straightening teeth as we head back to work, classes, and social settings.
2. Root: Down 63%
Broken IPOs are everywhere these days, but some of them can potentially be fixed. Root hit the market at $27 last year, and you know things aren’t going well if it finds itself on a list of stocks trading in the single digits these days. Root was hoping to be a hit with investors as the country’s first licensed auto insurance carrier powered entirely by mobile.
This is a massive addressable market. The U.S. auto insurance market was pegged as a $266 billion industry last year. Even a modest slice can off nicely for Root if it succeeds. The model itself is…
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