Monday was a big session for a number of stocks, as several
released fresh guidance or offered up their take on the key holiday
season. While many of these new releases led to big moves,
clearly stood out on the downside.
In fact, shares of the once-high flying SODA crashed by over 25% on
the day, thanks to worries over holiday sales, and concerns over
its 2014 outlook. Volume was also extremely elevated, with volume
hitting more than ten times normal following the news release.
SODA Earnings in Focus
SodaStream announced that its preliminary results for 2013 came in
a bit below expectations. Revenues were a tad light, missing a
consensus estimate by $5 million, though a net income miss-
of over 20%
-- was the real cause for concern.
This is because such a big miss on income despite the relatively
solid revenues suggests that profit margins are falling for this
do-it-yourself soda upstart. And, with increased competition, it is
clearly becoming much more difficult for SODA to keep growth levels
at a solid clip.
"Despite achieving all-time record sales, we failed to deliver our
profit targets and are disappointed in our fourth quarter
said Daniel Birnbaum
, Chief Executive Officer of SodaStream. "These preliminary results
reflect a challenging holiday selling season in the U.S. and
several factors, mostly from the second half of the quarter that
negatively impacted our gross margin."
SodaStream also said that it expects some of the headwinds to
continue into the first half of the year, suggesting more weakness
might be ahead for the company. However, SODA did note that they
hope to restore margins back up to past levels later on in the
SODA was already a Zacks Rank #4 before this poor news on the
guidance front, so estimates were trending lower for the company
leading up to this event. Plus, its industry also receives a pretty
terrible rank too, as it is currently in the bottom 10% of all
And with the reduced guidance, it seems very likely that earnings
estimates will be coming down again over the next few days. If that
is the case, Zacks Rank #5 territory is very likely for this
underperforming stock before too long.
Can SODA Get Back on Track?
A 25% move lower is pretty large, though the reduction in profits
was quite big too. And given the dependence of SODA on its key
product, it will be tough to turn things around in 2014, especially
if margins can't rebound.
Widespread adoption will be necessary, as SODA can make back more
on the flavor packs and carbonation cartridges as a recurring
revenue stream. The firm is also hopeful that its
ad at the Super Bowl
will help to jumpstart this process, but it will definitely be an
After all, earnings estimates were already tumbling before the
weakness in the holiday quarter was confirmed by SODA management.
And with such widespread sluggishness in the consumer products
market, it may take some time before SODA can find its footing
again, suggesting more rough trading could be ahead for this
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SODASTREAM INTL (SODA): Free Stock Analysis
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