Why SodaStream International Shares Plunged

Is this meaningful? Or just another movement?

Jan 13, 2014 at 7:15PM

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 SodaStream International (NASDAQ:SODA) were going flat today, falling 26% after the company revised its full-year guidance downward.

So what: The maker of the countertop soda machine provided its preliminary results for last year, saying it now sees revenue of $562 million, below the $567.2 million it guided toward in its October earnings report. The shortfall in net income was even worse, as the company now expects adjusted profits of $52.5 million, versus former projections of $65 million, essentially even with a year ago. What gives? Profits tanked in the fourth quarter as costs rose. CEO Daniel Birnbaum said the results "reflect a challenging holiday selling season in the U.S. and several factors, including lower sell-in prices and higher product costs, a shift in product mix, and unfavorable foreign currency changes."

Now what: Notably, top-line growth was still solid and is tracking toward 29% on the year, but a dramatic drop in profits like this is definitely a concern. The change in product mix probably reflects greater relative sales of its low-margin starter kits, not a surprise for the holiday quarter, but the company had already seen a hemorrhaging of its consumable sales starting in the third quarter, when revenue from its flavor units rose just 7% and fell in the U.S., probably a reflection of competition in that category. As a SodaStream shareholder, I find this news disconcerting, but I think the stock got hammered a bit too hard here. This has always been a volatile stock, and Its management team said it was working to restore margins to historical levels. They have proved highly capable before, and the stock now trades at an average P/E of 16. For a company that just saw its top line grow 29% last year, that seems like a mistake.

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Fool contributor Jeremy Bowman owns shares of SodaStream. The Motley Fool recommends and owns shares of SodaStream. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Jun 12, 2015 at 5:01PM

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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