Oct 7 (Reuters) - At least five brokerages started coverage of teeth alignment company SmileDirectClub Inc SDC.O on Monday with "buy" or equivalent ratings, despite the stock's underwhelming performance since its market debut last month.
The Nashville, Tennessee-based company's IPO was priced at $23 per share on Sept. 11, above the expected range, but the stock has tumbled 36% to Friday's close.
SmileDirectClub became the latest start-up over the past few months that went public to face a reality check, as investors re-think companies that post sustained losses and question the sustainability of their long-term business models.
Shares of loss-making unicorns such as Uber Technologies Inc UBER.N and Lyft Inc LYFT.O have underperformed since their high-profile market flotation.
Last month, office-sharing startup WeWork was forced to abandon its much-anticipated IPO, while Endeavor Group Holdings, the U.S. entertainment and talent agency company backed by Hollywood powerbroker Ari Emanuel, also pulled its listing plans.
Shares of SmileDirectClub were up nearly 3% at $15.15 before the bell following the bullish calls from a host of brokerages that included some of the underwriters.
J.P. Morgan, which also served as one of the lead underwriters to the IPO, initiated coverage with an "overweight" rating.
Analysts at Credit Suisse also handed out an "outperform" rating and said the start-up's partnerships with drug retailers such as CVS Health Corp CVS.N and Walgreens Boots Alliance Inc WBA.O would allow it to expand its footprint in a capital-efficient market.
"SmileDirectClub's clear aligners and the direct-to-consumer business model the company employs solve many of the issues in the orthodontics market that have remained unaddressed for several decades – high costs and a significant time commitment," J.P. Morgan analysts wrote in a note.
Despite the buy recommendations, most brokerages assigned price targets that were below SmileDirectClub's IPO price.
J.P. Morgan was the most bullish with a price target of $31, while Credit Suisse was the most bearish with a target of $18.
(Reporting by Akanksha Rana in Bengaluru; Editing by Shailesh Kuber and Sriraj Kalluvila)
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