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SDC – Smile Direct Club Close to Squeeze?

SMILE DIRECT CLUB BACKGROUND

Smile Direct Club, Ticker symbol SDC has been beaten down in stock price since early February 2021. The stock was down-trending, similar to other popular retail-owned stock. Due to the Pandemic and lockdown as well as missed earnings and growth delay in the business, shorts were betting this stock will go down to $0. Shorting the stock means you believe that the stock will go down and bet against the stock.

SDC is trading around $5.60 as of the publication of this article.

SMILE DIRECT CLUB FUNDAMENTAL

Smile Direct Club focused on making providing simple clear aligner treatment. Smile Direct Club treated 1.5Million people with aligner treatment and growing rapidly. The business offers affordable treatment with quality care and leading in the simple aligner sector.

Revenue for the quarter was $174.2 million, which is up 63% year-over-year, but a decrease of -13% over Q1 2021. SDC stated that they are growing rapidly and expect to grow even higher in five years from now.

SMILE DIRECT CLUB SHORTS DATA

As shorts sellers being greedy and want this business to go down to $0 even they know fundamentally that is not possible. The main problem in the market is Greed and Fear, which shorts are being greedy and keep shorting this stock until there are no stocks to borrow anymore. That is the pattern SDC is showing recently with high short interest and low shares available to borrow.

As of now, there are only 350,000 shares of SDC is available to borrow, indicating the possible short squeeze.

Short Interest34,238,580 shares
Short Interest Ratio1.45 Days to Cover
Short Interest % Float34.49%

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One Comment

  1. Thanks for the DD, but I disagree with SDC’s days to cover being 1.45 days. What numbers did you use to arrive at that calculation?

    Days to cover is calculated by taking the number of currently shorted shares and dividing that amount by the average daily trading volume. Prior to the huge action increase this week, the average volume was a little over 6M. Taking an average volume of between 6 and 8 million shares coupled with short interest between 34 and 40 million (current Ortex data) I arrive at days to cover being between 4.3 on the low end and 6.6 on the high end.

    I think you are making a mistake of using something like an average daily volume of 23.5M shares, which is very skewed. Yes, a couple of days this week saw volumes that high, but it is not the norm.

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