Flat Soda

If trading patterns were named after novels, Great Expectations would be one way to describe the euphoric pop at Jones Soda (Nasdaq: JSDA) in recent weeks. Unfortunately, last night's quarterly report doesn't live up to the chart showing a promising growth stock that has doubled over the past two months.

This report shouldn't have mattered. The fuel behind Jones Soda's recent gains is a canned-soda distribution deal with National Beverage (NYSE: FIZ) that is sending the product into Wal-Mart (NYSE: WMT) Supercenters, Kroger (NYSE: KR), and Safeway (NYSE: SWY). The cans are already carbonated regulars at Target (NYSE: TGT), but this deal will grow the company's retail reach from 2% of the market to a whopping 25% chunk by Memorial Day.

That growth isn't factored into the numbers for the quarter that ended in March, but analysts were thirsty anyway. Wall Street was expecting Jones Soda to post a profit of $0.03 a share on a 50% surge in revenues. Instead, it's simply breaking even on a mere 5% gain in revenues.

It's not pretty. If not for interest income, Jones Soda would have posted a loss for the quarter. The lethargic top-line showing came despite a dramatic surge in case sales. And the pathetic bottom-line showing happened despite healthier gross margins.

Investors now have to wonder whether the boost in lower-priced canned products will cannibalize the original bottled pop with its user-submitted photographic labels. One would hope not. It's the same syrupy stuff, but it's being marketed differently, and to different channels.

So let's see how the current quarter plays itself out. The September-ending quarter will be even more important, because it will include all three months with the wide wingspan of retail canned distribution. Disappoint investors then, and Great Expectations may become A Farewell to Arms.

Want to keep up with the Joneses?

• I first singled out Jones Soda two years ago, when it was trading for $4 a share.
• I tagged it as a "pop star" a few months later.
• And I checked in again this past summer.

If you like small stocks with spunk like Jones Soda, you may appreciate the Motley Fool Rule Breakers ultimate growth-stock newsletter service. Subscribe today, or take the taste test with a free 30-day trial subscription.

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Longtime Fool contributor Rick Munarriz actually enjoys some of the more exotic Jones Soda flavors, like Caramel Apple and Key Lime Pie. He does not own shares in any of the companies in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.