stock moved higher Wednesday after the company posted
better-than-expected bottom-line results, but it's better to keep
your high-five hand in its holster. Sales growth is slowing.
Margin pressures continue. Soda consumption trends aren't very
encouraging. Guidance is getting hosed.
SodaStream stock moved higher late last week on buyout
speculation. Sources told Bloomberg that the company behind the
world's leading carbonated beverage maker is in talks to be
acquired by an undisclosed private equity firm for roughly $40 a
A buyout at that price would be humbling. SodaStream was
trading for nearly twice that price when it peaked two summers
ago, and yet again last summer, when reports out of Israel had
looking to take it private to the tune of $95 a share.
PepsiCo as a buyer
didn't make a lot of sense
at the time, and it quickly squashed the scuttlebutt. Why would a
beverage giant betray its bottlers, and sacrifice its retail
operations and fountain sales by providing consumers with a more
cost-effective means to make their own pop? However, when
PepsiCo's only larger rival,
, announced that it was
making a play
for homemade carbonated beverages five months ago, Pepsi and
SodaStream didn't seem so outlandish.
If SodaStream has resisted any buyout overtures in the past,
it may want to revisit an exit strategy. The stock opened sharply
higher on Wednesday and was trading near $33 per share around 3
p.m. EDT on Wednesday, but let's go over a few of the problematic
nuggets in the report.
- Revenue rose just 7%, with stateside sales continuing to
- Net income plunged 29%. That was a lot better than
expected, but it's still margin contraction.
- Unit volume of carbonator refills and syrup bottles rose
17% and 9%, respectively, but actual soda makers declined
- Three months ago, SodaStream was targeting 15% revenue
growth for all of 2014. Now, its outlook calls for a mere 5%
uptick on the top line.
It was easy to see the guidance drop coming. Even as a bull
and longtime investor, I pointed out how it seemed inevitable
back in May
. "SodaStream may also be setting itself up for a fall this year
by sticking to a 15% top-line guidance target for all of 2014
that implies sales will grow at a roughly 25% clip during the
latter half of this year," I wrote at the time. "That just
doesn't seem realistic."
So, is the stock moving higher because it's holding up better
on the bottom line, owning up to decelerating growth, or slipping
to the point where it's vulnerable to a hostile buyout offer?
Let's go with the final option.
This would certainly be a good time for PepsiCo to weigh its
options, especially because buying all of SodaStream would cost
far less than the roughly $2 billion that Coke's parent has spent
to buy into the upcoming Keurig Cold platform earlier this year.
This also has to be a dinner bell to private equity firms that
can attempt a turnaround of SodaStream's still-growing business
away from the quarterly judgments.
Investors should never buy stocks based on buyout speculation,
but it's hard to fathom SodaStream as a stand-alone entity, with
desperate soda giants wanting in on this niche at a time when its
own driving skills are suspect. The cola wars are about to get a
bit more interesting.
More from The Motley Fool:
Warren Buffett Tells You How to Turn $40 Into
SodaStream Stock at $40 Doesn't Sound So Bad
originally appeared on Fool.com.
owns shares of Keurig Green Mountain and SodaStream. The Motley
Fool recommends Coca-Cola, Keurig Green Mountain, PepsiCo, and
SodaStream. The Motley Fool owns shares of PepsiCo and SodaStream
and has the following options: long January 2016 $37 calls on
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