Did SodaStream Get Lost in Translation?

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In Lost in Translation, Scarlett Johansson plays an American newlywed who has followed her husband to Tokyo while he photographs a Japanese rock band. She meets Bill Murray, who's playing a slightly sadder version of Bill Murray. The two wander through Tokyo, building a strong personal relationship even as their connection to the outside world remains loose and disconnected. SodaStream (NASDAQ: SODA  ) is apparently the new Bill Murray.

The carbonator announced a new partnership with Johansson, setting her up as the company's first brand ambassador. (It makes you wonder if Michael Jordan ever thought of himself as a brand ambassador for Nike -- I imagine not.) Days after the announcement, SodaStream's stock fell more than 25% when the company announced an update to its fiscal year results. It feels very much like SodaStream has wandered off into the night in a land it doesn't understand, staring at Johansson's face as the rest of the world moves on to new things.

SodaStream's 2013 update
At the end of November, SodaStream was looking for net revenue of around $54 million. In January, that expectation dropped to $41.5 million -- 95% of last year's income. Johansson doesn't seem to care. She's already shown up all over the online store and in an infomercial, of sorts. Her official role is to help get the SodaStream message across, something the company has made a bit of a reach for by tying Johansson's self-empowerment outlook to SodaStream's vision of "empowering people with easy-to-use, fun ways to enjoy better-for-you, better-for-the-environment bubbly beverages." 

After the update, SodaStream's stock tanked, and it's now down 25% on the year. Yesterday, Barclays piled on, cutting the stock's price target from $100 per share to $55. Ouch.

The shortfall came mainly from the company's holiday season, with management citing sales, product costs, and currency exchange rates as drags on the income statement. SodaStream argues that the future is still bright -- just not right away.

SodaStream's 2014 in a nutshell -- or bottle, I guess
Margins will continue to be pressured in the first half of 2014, according to the company's recent investor presentation. That's going to ease, though, as the year goes on. Then, SodaStream is going to be back to the races. The biggest key to the company's future success lies in the maturing of markets.

Management compared the Swiss market to the American market, arguing that the Swiss market is more mature. There, base units account for just 18% of total sales, while consumables make up the rest. That's pushing margins up in Switzerland, where operating margin is above 25%. In the U.S., on the other hand, consumables only make up 54% of total sales, and operating margin is a mere 5%. 

This year, SodaStream needs to get America back on track if it wants to keep it together. Sales in the Americas account for more than a third of total sales, so any margin pressure will be reflected across the whole business. To help its image, SodaStream is going to make a Super Bowl appearance, so be on the lookout for that.

Better options are out there
While SodaStream has been lumped in with growth stocks for some time now, it just isn't growing. In Lost in Translation, Murray ends up with the wrong woman, because it seems like the right thing to do. That's a short-term investment. To get beyond the ups and downs of SodaStream, consider reaching out to companies with stronger brands. SodaStream has said it wants to "normalize" the brand, making it a household name. If that happens, I'll reevaluate the company's strength. For now, though, I'm happy to leave Scarlett at the bar with Bill.

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Read/Post Comments (6) | 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 28, 2014, at 7:02 PM, martinitony wrote:

    "While SodaStream has been lumped in with growth stocks for some time now, it just isn't growing."

    Sales 2013=$436 million

    Sales 2014=$562 million

    Sales growth 28.9%

    Huh, you said it just isn't growing.

    Please explain.

  • Report this Comment On January 28, 2014, at 7:58 PM, XMFRedRam wrote:

    Thanks for reading.

    As you pointed out in the quote, the reference was to the stock, which has fallen 29% in the last twelve months.

    I think it's fair to say that if you added SODA to your portfolio to get some growth, you've been disappointed. It's just not a growth stock.


  • Report this Comment On January 28, 2014, at 7:59 PM, Pancakes22 wrote:

    You know David G.

    said in his latest video he doesn't like SA at all because half the time they give absolutely no facts and are wrong when it comes down to the actual facts.

    You know, just seriously! Really makes me angry when you do not stand for the same values of your company. You should be ashamed.

    You can have a different opinion that's great!

    But shut your mouth when you have nothing to say!

    You are supposed to be above that and hold a higher standard.

    Go back to banks and get a few numbers since that's what they're all about.

  • Report this Comment On January 28, 2014, at 8:09 PM, joelkatz wrote:

    TMFredRam, shocked to see your explanation, Do you really have no clue, or playing I, Growth stocks referees to the company's earnings, no the stock value, her I posted you a link to do some reading prove yourself

  • Report this Comment On January 28, 2014, at 8:09 PM, joelkatz wrote:
  • Report this Comment On January 28, 2014, at 8:18 PM, XMFRedRam wrote:

    Hey Joel,

    Sorry. I shouldn't have used a colloquial definition. I think, in general, people invest in growth stocks to get growth in their portfolio, but you're right -- it is a reference to earnings.

    On that basis, SODA earned $50 million in adjusted net income in 2012, and is forecasting $52.5 million for 2013.

    A 5% increase is still small and SODA is still not a growth stock. Again, apologies for the lackadaisical definition.


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Andrew Marder

Andrew Marder worked in retail for years, holding jobs ranging from bookseller to bank strategy analyst. He has worked for the Motley Fool since 2012, and loves coffee.

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9/4/2015 3:59 PM
SODA $14.48 Down -0.11 -0.75%
SodaStream CAPS Rating: **