SodaStream International (SODA)
SodaStream International (SODA) has been on my short watchlist for a very long time. I wrote about it SODA stock almost two years ago. My thesis then, as now, was: “The world’s premier flavor houses are constantly creating an infinite selection of soda flavors … at prices that are ridiculously cheap. Why buy a product that requires me to exert labor, to achieve a product that isn’t any better, at much higher prices?” I also said that SODA stock would go higher on a short squeeze, which might be a good time to short.
I was right, as SODA stock spiked above $75 nine months later. Today, it is 50% off that price (perhaps the people who commented on that article would like to eat crow at this time). And despite such a hard fall, I don’t think SODA stock is done.
In Q1, EPS cratered to 8 cents per share, down from 57 cents because it had to aggressively market to the United States. Well, U.S. sales were down sequentially and down 28% year-over-year. The Q4 report indicated there was year-end discounting, which means products aren’t selling well. The company is free-cash-flow negative, and cash is starting to dwindle. It’s a stock to short and if you are shorting, I’d keep that position in place. Otherwise, consider shorting here with a 7-10% stop loss. I think this eventually goes to zero, or perhaps single digits where Coca-Cola (KO) buys it.