SodaStream Shares Plunged: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of homestyle soda-machine maker SodaStream International (Nasdaq: SODA  ) lost some of their fizz today, going flat to the tune of 11.6% on above-average volume.

So what: Investor-entertainer Jim Cramer savaged the stock on his popular Mad Money show last night, citing quality control issues and a dodgy second quarter. When Cramer speaks, small-caps jump -- or dive.

Now what: As much as we Fools like to poke fun at Cramer, his misgivings about the second quarter make a lot of sense. For example, when SodaStream doesn't strike a deal with megaretailer Costco (Nasdaq: COST  ) because management doesn't like the product placement in Costco stores, it sounds like a weak excuse that raises questions about how sellable these soda systems really are. In Cramer's eyes, SodaStream machines are emphatically not the next hypergrowth consumer opportunity like the Green Mountain Coffee Roasters (Nasdaq: GMCR  ) Keurig single-serve machines.

This fad has failed once before -- or am I the only one who was surrounded by SodaStreams for a brief moment in the early 1980s? As much as I respect my friends on the Rule Breakers research team, their endorsement of SodaStream leaves a sour taste in my mouth.

Interested in more info on SodaStream? Add it to your watchlist.

Fool contributor Anders Bylund holds no position in any of the companies discussed here. The Motley Fool owns shares of Costco Wholesale. Motley Fool newsletter services have recommended buying shares of Costco Wholesale, SodaStream International, and Green Mountain Coffee Roasters. Motley Fool newsletter services have recommended creating a lurking gator position in Green Mountain Coffee Roasters. Yeah, we coined that term. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool is investors writing for investors.


Read/Post Comments (23) | Recommend This Article (11)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 16, 2011, at 1:03 PM, jimmy4040 wrote:

    Goodbye Anders! You know that doubt is not welcome here but you did it anyway. We will have to find a Gallileo like solution for you.

  • Report this Comment On August 16, 2011, at 2:06 PM, cmstripling wrote:

    Lots of people brewed their own coffee at home to begin with, that made GMCR's product more appealing because it streamlined the process and eliminated waste (and mess).

    No one makes their own soda at home for a device like this to be little more than a fad (except for maybe the carbonated water folks). But the fizzy water people aren't in vast enough numbers to justify the growth expected.

  • Report this Comment On August 16, 2011, at 2:16 PM, jimmy4040 wrote:

    I think Europe's worsening GDP has had a subtantial affect on SODA today as well. It has been their mostly deeply embedded market I believe.

  • Report this Comment On August 16, 2011, at 2:46 PM, TMFZahrim wrote:

    @jimmy4040: Beelzebub has a devil set aside for me.

    Anders

  • Report this Comment On August 16, 2011, at 2:51 PM, EnigmaDude wrote:

    Seems like a bit of an over-reaction. I think this Soda will pop!

  • Report this Comment On August 16, 2011, at 2:55 PM, David369 wrote:

    Well I don't care if it is a fad. That fad has been going on in Europe for about 2 years and they are still selling more of them over there. When they start selling in Japan I figure they will really sell there. I don't think the average American will buy them but the mid to upper class who think they are either helping the environment or saving money (or both) will. Then there are those that refuse to drink that nasty high frutose corn syurp and want something besides Sierra Mist.

    It might be a fad but as long as Europe keeps buying the refills I think it might last for a year or two. I think the Europeans are less impulse buyers than we are and probably more cynical of anything that looks like a fad. The difference is that they are probably more willing to work a little to save a little.

    I'm the population group that probably will not ever buy one (don't drink sodas) but I am trying to talk my brother into one so I can see how it works.

  • Report this Comment On August 16, 2011, at 2:56 PM, noirblood wrote:

    The health factor is being ignored I think a little too much. America has a major obesity problem, and SodaStream soda has significantly less sugar and calories than the leading packaged brands. I'm not saying SodaStream is going to cure America's obesity issues, but I think there is enough of a focus on health in this country that this differentiation could provide a reason for sales growth beyond the novelty appeal.

  • Report this Comment On August 16, 2011, at 3:24 PM, jimmy4040 wrote:

    Ok just got back in for a trade at 39.77 Should have pulled the trigger at in the 38's but I was waiting to see if there was gong to be another high frequency trading meltdown. I am stopped out at 39 for today. We'll see!

  • Report this Comment On August 16, 2011, at 3:51 PM, jimmy4040 wrote:

    Got stopped out! Oh well, made a lot this morning, and lost a bit back now. Stops are your friend in a volatile market.

  • Report this Comment On August 16, 2011, at 4:24 PM, David369 wrote:

    By the way, does anyone know how they are marketing these things? I haven't seen an AD on TV or print. If their sales is just from word of mouth I am really impressed. Can't imagine how many more they would sell with TV ads.

  • Report this Comment On August 16, 2011, at 5:36 PM, minimumwage wrote:

    @David I saw one ad in a skymall magazine, but you have a point.

    I just cannot wrap my head around why anyone would like this product. It's so silly, and I think its valuations are crazy. I expect a pop from buyers and then a slooooowwww decline to obscurity.

  • Report this Comment On August 16, 2011, at 6:02 PM, haruglory12 wrote:

    Anyone think the guidance is very conservative considering the magnitude of earning beats (155%, 85%, 38%). Beats are in euros; are greater with a currency translation.

  • Report this Comment On August 16, 2011, at 6:03 PM, rosalindr wrote:

    I've been using a soda maker for six years. It's the handiest appliance in my kitchen. I use it for seltzer, but I used to add the mixes a few years ago when my water tasted funny. I expect big things from Soda Stream (used to be Soda Club when I started using it).

    A few years ago they had a picture of a coffee maker next to the soda maker on the website. That's what they are aiming for and look how many years it took for Mr. Coffee to take over from the old percolator.

    Yes, it will take time for consumers here to start thinking about making soda at home, but the convenience and simplicity (no electricity required either), will win out. This isn't some short-term investment, but it will pay off big time in 10-20 years. Didn't it take Green Mountain Coffee 15 years to catch on, and Apple Computer 30? Don't be in such a hurry to count out SODA.

    Roz

  • Report this Comment On August 16, 2011, at 7:09 PM, USAFTV1365 wrote:

    Green Mountain Coffee tastes good. Tastes just like coffee. Soda Stream Flavors, for the most part, don't. Those of us who grew up on Coke, Pepsi, 7-Up and A&W Root Beer bought a Soda Stream for convenience and out of curiousity. Now mine sits idle on the counter as I return to what tastes good.

  • Report this Comment On August 16, 2011, at 7:19 PM, David369 wrote:

    @minimumwage Thank you. Yeah, I expect it will last 2-4 years over here. Might actually last in Japan though. Heck, they spend 30-40 minutes or longer making tea. They might get into one of these things. Of course, if Sodastream really wanted to suck people in they could be like Jelly Belly and start putting out "menus" for like a pina colada, caramel apple, etc where it took several flavors to be mixed. Probably sell more that way. Course they would have to produce more flavors too...

  • Report this Comment On August 16, 2011, at 9:14 PM, cconforti wrote:

    If I remember correctly Mr Crammer did not like Green Mountain coffee either

  • Report this Comment On August 16, 2011, at 10:09 PM, jimmy4040 wrote:

    I don't really think the product is the story. When it first came on as an RB pick months ago I was skeptical because the product didn't match the multiple. I got hammered in these pages. I subsequently realized that the stock price wasn't about the product, but about the story. They were selling the growth STORY.

    That's when I personally changed direction on the stock and realized it would be a great trade, no matter whether the company was successful or not. I used to buy and hold RB stocks because they were great companies. Lately though they have become more story stocks than company stocks. Things like a Chinese fast food restuarant, a Chinese dating service, Ancestry however you would like to describe that.

    In a market where everthing goes up, say pre-2008, these stocks will boom for quite some time. In todays' market they have been following the expected quick increase big drop pattern. That's why I consider them trade stocks at least in this type of market.

  • Report this Comment On August 16, 2011, at 10:30 PM, Lynken wrote:

    I don't put much faith in a stock that has a product that adds time to people's day making one of the more mundane things in life. Soda (in all flavors) is something you as a consumer just buy from the store; always has been, always will be. This stock has been overpriced for quite a few months on what is essentially a gimmick product. Is it cool that people would want to try making their own soda pop at home? Sure. It's a neat-o X-mas "gag" gift your great Aunt Ethel gives you that you try 3 times at most and then set it aside to join the other failed gadgets inhabiting gag-gift Island and that's about the extent of it.

    Why? Because the big names in Soda do it right, rather cheaply, and in tons more flavors that you could ever hope to do at home. Take what profits you have now and find something worthwhile... like KO =)

  • Report this Comment On August 16, 2011, at 10:59 PM, TruffelPig wrote:

    Funny is that Cramer was the BIGGEST FAN of SODA just before the earnings. He pumped that stock relentlessly. Now he has turned against his once beloved SODA. Soon he will turn against LULU - like he did with FFIV. He loves the momo stocks until the run out of momo.

    I think Cramer is giving ok advice on many companies, but he also really gets stuff way wrong. I remember the story with "buy CAT because Japan has to build......" - true, but it will be a bit later than he thought. Much later. Or how about the coal super cycle......they need coal in Japan because of the Nuke crisis and in China was the argument. Maybe, but why buying coal if you can buy oil stocks.

    Anyhow, everyone is now so scared about the economy but 4 month or so ago this was predicted because of China slow down and Japan crisis. Next quarter will look better.

    ....rumble off.....

  • Report this Comment On August 16, 2011, at 11:01 PM, eramsoi wrote:

    I have been watching this stock since the IPO. First bought in at 30. It went up to 42 or so and I sold. Went to 45 thought I made a mistake selliing too early. It went down to 22 or so. I stayed clear until it was around 60 got back in rode it up to around 70 sold out bought in last week at 45 sold this morning at about 48 just before the drop. Net net, I have made $300 + or - over a few months. it is so volatile and of course the market has also been unstable much of the time too.

    However, I am impressed by where these things are showing up for sale. Bed Bath and Beyond, Bartells, Macy's, Target a lot of different places and it seems to keep expanding. So, not having Costco does not seem like a major issue to me.

  • Report this Comment On August 17, 2011, at 1:31 AM, upndn wrote:

    So Costco offered SODA a spot. How well does Costco's methods link with them? A one week demo and then bury two flavor items back on isle 9.

    If I owned SODA I want Target to demo and give away free tastes for 3 months. Sell the full line of machines, 20 flavor items and carbonation containers. Big win win for both companies.

    Then Wallyworld wants them, they can't have a home soda maker gap!

    Sales fly X2 X4 X6

    It's possible.

    ----------------------

    Anders Bylund;

    <<<<am I the only one who was surrounded by SodaStreams for a brief moment in the early 1980s? >>>>

    Did you run a used appliance store back then?

    UP

  • Report this Comment On August 17, 2011, at 7:42 AM, TMFZahrim wrote:

    @originalupndn,

    > Did you run a used appliance store back then?

    Ha! No, I was about 7 years old and all my friends were buying these things. The local convenience store (way out in the Swedish boondocks) sold CO2 containers and flavor packs for it. SodaStreams were everywhere. And then the whole phenomenon disappeared and I never thought of these silly things again until the IPO. Will history repeat itself, three decades later? Who knows -- but these things scream "fad!" to me.

    Anders

  • Report this Comment On August 17, 2011, at 2:47 PM, jimmy4040 wrote:

    Again, thank God for stops. People who don't use them in a down market should reconsider.

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