Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Can Sodastream International Ltd Pop Back?

Last week was brutal for Sodastream International Ltd  (NASDAQ: SODA  ) shareholders, as the global leader of home carbonation surrendered 22% of its value. The pessimism is warranted. SodaStream's refreshed outlook for the holiday quarter calls for it to post a small profit on a 26% uptick in sales. 

SodaStream disappointed, and the market did what it does nearly every time that it sees that happen. 

However, more than a week removed from SodaStream's bombshell, we can begin to walk through the ruins to assess the damage. Analysts who thought SodaStream would be ringing up a profit of $0.41 a share for the quarter are now hovering around $0.10 a share. SodaStream didn't publicly peek at 2014, but Wall Street gets paid to do that, and what a month ago was a profit target of $3.28 a share has been whittled down to $2.46 a share. 

This isn't necessarily the end of the downward revisions. There could be a few unfashionably late analysts who have yet to chime in, and naturally, things can always get worse when SodaStream reports next month if its early read on 2014 isn't comforting. However, we can begin to assess the damage and provide a temporary approximation of what the pros see the year ahead has in store for the company that popularized the making of carbonated beverages at home. 

On the surface, things appear comforting. Analysts see revenue and earnings per share climbing 21% and 17%, respectively, in 2014. SodaStream is fetching a reasonable 16 times this new year's projected profitability. That's a bargain, and not just because it's a discount to its slower growth rate. Coca-Cola (NYSE: KO  ) and PepsiCo (NYSE: PEP  ) both trade at 18 times this year's income targets. There's naturally a consistent predictability to Coca-Cola and PepsiCo, but keep in mind that these are companies only expected to grow their sales by 3% to 4% this year. 

The arguments that carbonated beverages are on the decline, or that SodaStream is a fad, don't carry a lot of weight at the moment. Sodastream, Coca-Cola, and PepsiCo are all expected to grow their sales this year, and all three are looking to grow their bottom lines even faster. Knocks about SodaStream's beverage maker being a fad go against the actual sales growth that the Israeli-based company has been producing. Growing sales 26% this past quarter doesn't suggest that sales have peaked, and neither does the year ahead of projected growth in the high teens. 

SodaStream isn't perfect, of course. Margins took a cold shower in the fourth quarter, and SodaStream needs to improve its operations and its product mix to get its markups back on track. However, with the new Scarlett Johansson Super Bowl ad on the horizon next weekend, the bar-raising potential of SodaStream Caps flavor capsules, and the possibility that next month's report is more optimistic than the market is right now about SodaStream's prospects, it certainly seems like an opportunistic time to warm up to SodaStream.

Last week, and the last half of 2013, haven't been easy, but until sales go the wrong way, it seems as if the revolution for homemade carbonated drinks is still taking place.  

Source: SodaStream.

Warren owns Coke, but don't call him a dealer
Warren Buffett has made billions through his investing, and he wants you to be able to invest like him. Through the years, Buffett has offered up investing tips to shareholders of Berkshire Hathaway. Now you can tap into the best of Warren Buffett's wisdom in a new special report from The Motley Fool. Click here now for a free copy of this invaluable report.

Read/Post Comments (1) | Recommend This Article (2)

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 24, 2014, at 6:26 PM, texasflyfish wrote:

    Rick, I agree with you that the market is probably over-reacting. Their sales in Europe have been a good long term foundation and there is certainly plenty of room for growth in the US. Thanks for the article.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2804884, ~/Articles/ArticleHandler.aspx, 8/31/2015 1:00:01 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Rick Munarriz

Rick has been writing for Motley Fool since 1995 where he's a Consumer and Tech Stocks Specialist. Yes, that's a long time. He's been an analyst for Motley Fool Rule Breakers and a portfolio lead analyst for Motley Fool Supernova since each newsletter service's inception. He earned his BBA and MBA from the University of Miami, and he now lives a block from his alma mater.

Today's Market

updated 2 days ago Sponsored by:
DOW 16,643.01 -11.76 -0.07%
S&P 500 1,988.87 1.21 0.06%
NASD 4,828.33 15.62 0.32%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

8/28/2015 4:00 PM
SODA $14.91 Up +0.49 +3.40%
SodaStream CAPS Rating: **
KO $39.45 Up +0.18 +0.46%
Coca-Cola CAPS Rating: ****
PEP $93.53 Down -0.07 -0.07%
PepsiCo CAPS Rating: *****