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

SodaStream investors have had a very turbulent year, with shares fluctuating wildly. Does this recent crash mean investors should jump ship?

Jan 19, 2014 at 10:07AM

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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Blake Bos 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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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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