The Real Reason SodaStream Stock Crashed. Should Investors Run Away?

Shares of SodaStream (NASDAQ: SODA  ) are now down around 50% from their 52-week high, after the company issued updated guidance that sent shares down more than 20% in one day. So for old and new investors alike, both are sitting on large losses when the overall market is up. These large losses can often lead to emotional decisions and make for some disastrous investing results. So why have shares suddenly fallen off a cliff, and will they ever climb back to previous highs?  

Understanding Mr. Market's madness
Being able to comprehend the reasons behind a sell-off can be very advantageous to investors and aids in making better decisions. When we look at SodaStream's recent implosion, we find that the primary reasons behind it weren't the updated guidance but rather uneasiness over three factors -- the concern that at-home soda is a fad, low insider ownership, and a poor competitive advantage. The updated guidance simply reignited a fuse over these worries, which in turn set in motion the dramatic sell-off.

For long-term investors, the updated guidance presented little information to be able to gauge how the company did over the holidays and offered little rationale for the performance. It's difficult to remain composed in the face of dramatic stock moves, but making decisions on limited information can be quite dangerous. 

What's an investor to do, then?
Each individual's situation is unique, so there's no clear-cut answer on what to do. But waiting for more fundamental information about the business isn't a bad idea.

In the following video, Fool analyst Blake Bos breaks down the sell-off for investors, why he thinks the three factors mentioned here are non-issues, and what investors should focus on going forward to make sure SodaStream is still executing its long-term vision.

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Read/Post Comments (5) | Recommend This Article (4)

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 January 19, 2014, at 11:49 AM, pastabelly wrote:

    I see you mention K cups which is interesting because GMCR had a similar drop in stock price about 2 years ago. While it was for different reasons the outlook was not good at the time. The drop turned out to be a great buying opportunity since GMCR recovered and is doing quite well now. Apples and Oranges? Maybe, but I'm happy to see someone take a positive look on this situation since I too am long SODA.

  • Report this Comment On January 19, 2014, at 6:55 PM, TG1956 wrote:

    The biggest problem I see with SodaStream is a poor job of marketing of their products in the stores. The retailers don't seem to know which syrups they need to carry if they want to sell their product. I drink their Diet Mt Dew knock off and none of the stores in my area carry it. If they want to compete with Coke, Pepsi, Mt Dew, 7UP, Sprite and other name brands they have to carry their alternatives. Not Kool Aid, Ginger Ale and other off flavors.

  • Report this Comment On January 20, 2014, at 12:59 AM, Pancakes22 wrote:

    Blake Where have you been!

    Love your commentary.

    Been waiting for your take for awhile.

    Get back at it like a Boss!

  • Report this Comment On January 20, 2014, at 12:50 PM, TMFBos wrote:

    @Geidej & pastabelly,

    Thanks for the compliments, i really enjoy following the SodaStream story :).

    Sorry for the untimely post, life has been pretty busy, and I prefer to let the smoke settle a bit so i can think clearly on a particular event.

    Can't wait for earnings so we can see some sell-in and sell-out numbers for soda machines, CO2, and flavoring. Remember sell-in is when SODA sells product to a retailer/distributor, and sell-out is when the retailer sells the product off the shelf. I prefer to follow sell-out because it more accurately shows how the product is performing in stores.

    Plus I'm super curious to see how the new caps did at Bed Bath and Beyond. I think the one thing that would really cause me concern as an investor would be a dramatic slow down in CO2 sales. So I'll be keeping a careful eye on that metric as it most closely relates to people actually using their machines.



  • Report this Comment On January 20, 2014, at 2:32 PM, JuanCena wrote:

    SodaStream isn't really going to become an everyday appliance until you can get Coca-Cola and Pepsi on board to provide syrups and flavoring.

    I've tried SodaStreams' Dr. Pepper knockoff, and it just wasn't enjoyable. Too much vanilla taste.

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Blake Bos

The Motley Fool's industrials analyst, I specialize in 3-D printing and also do my best to stay up-to-date in the fields of robotics and oceanic transportation. Follow me on Twitter, Google+, and/or Facebook below for the most important 3-D printing industry developments and other great stories.

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9/1/2015 10:18 AM
SODA $14.72 Down -0.52 -3.41%
SodaStream CAPS Rating: **