Home-carbonation manufacturer SodaStream (SODA +0.00%) has posted modest gains of about 14% so far in 2013, but investors have to be somewhat disappointed given the stock's much more extensive gains earlier in the year. Even though the company has done a good job of capitalizing on some of the negatives affecting big-name soda makers Coca-Cola (KO 1.01%) and PepsiCo (PEP +0.19%), SodaStream stock hasn't responded well to trends over the second half of 2013. Can SodaStream regain its positive momentum, or will it turn out to have been the fad-based company that so many bearish investors have said it was all along? Let's take a closer look at the ups and downs of SodaStream this year and whether its stock will rise in 2014.
Image courtesy SodaStream.
What moved SodaStream stock this year?
In the first half of the year, SodaStream kept up its winning ways with a number of smart moves. Its Super Bowl ad didn't end up airing during the game, but that might have generated even more attention for the carbonator maker than it would have if the ad had made it into the commercial lineup. With moves like a partnership with cranberry-juice specialist Ocean Spray and a production agreement with U.S.-based private-label bottling company Cott, SodaStream put itself in better position to keep delivering attractive products to its customers.
Backing up SodaStream's gains were strong fundamentals. In May, the company announced quarterly results that included revenue gains of 34%, which helped push earnings up 20%. Both figures were higher than investors had expected, and particularly encouraging was the fact that consumables like carbon-dioxide gas canisters and soda flavors saw sales grow at a faster pace than soda makers. In particular, SodaStream has done a good job of playing up its environmental and health angles compared to Coca-Cola and PepsiCo.
Yet what really sent the stock to new heights was a report that PepsiCo might buy SodaStream for $95 per share. SodaStream shares spiked on the reports, but PepsiCo quickly denied the reports, sending the stock back down from what would turn out to be its highest levels of 2013.
SodaStream Total Return Price data by YCharts.
After a strong first half, SodaStream struggled. At first, the disappointment seemed linked to takeover speculation, as reports that potential buyers weren't interested in buying out the carbonator-maker didn't satisfy those who'd bought into the stock hoping for a short-term pop from a takeover bid.
But in late October, SodaStream's third-quarter earnings led to fears about the company's growth prospects. A 29% growth rate in revenue fell short of what investors had hoped to see, and an actual contraction in earnings caused further concerns, even though they were largely due to a one-time gain the previous year. With SodaStream cutting its earnings guidance for the full year and with flavor-sales growth slowing, pessimistic investors sent the stock downward, eliminating most of its gains for the year.
Stats on SodaStream
|
Revenue, Past 12 Months |
$527.56 million |
|
1-Year Revenue Growth |
37% |
|
Net Income, Past 12 Months |
$48.88 million |
|
1-Year Net Income Growth |
18% |
Source: S&P Capital IQ.
What's next for SodaStream?
As with most companies with products sold in retail stores, the holiday shopping season will be a key measure of SodaStream's ability to keep selling. With online promotions including a $25 rebate, SodaStream might see net income suffer in the short run in order to keep sales growth rising.
Yet the key competitive advantage that SodaStream has over Coca-Cola and PepsiCo is a far superior growth outlook, despite recent concerns. With the major beverage makers suffering concerns over potential obesity-related regulation and taxation both in the U.S. and in other areas around the world, SodaStream's shares might well be the best bargain you'll find this holiday season -- especially if flavor-syrup sales bounce back from their recent slump.
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