Yesterday sure was a thirsty Thursday when it came to SodaStream (SODA) stock.
What’s that? You had forgotten about the company that sells those little countertop machines used to make carbonized beverages in the comfort of your own kitchen — gadgets that many, myself included, wrote off as a fad from the start?
Well, you may well forget about it soon again, but yesterday’s explosion sure was an eye-catching one
Let’s take a look at what exactly happened with SODA stock, and what you need to know.
Yesterday’s SODA Stock Saga
The Numbers. SodaStream caught investors’ attention yesterday, with shares popping around 17% rather quickly and gaining as much as 26% during intraday trading. When all was said and done, SODA stock closed nearly 10% higher than it opened — a price of $31.63.
The Why. What exactly caused that move? Well, news broke that SodaStream is indeed in talks with an investment firm about going private — something that has been speculated about for quite some time. Word on the Street was that the transaction would value SodaStream $40 a share – a sweet and savory 38% above Wednesday’s closing price. Hence, the rush to order up some SODA stock.
The Context. Despite the impressive pop, keep in mind that yesterday’s closing price is still less than half SODA stock’s high point back in 2011. Bloomberg, which broke the going-private news, summed up the rocky ride:
“The stock soared to almost $78 in August 2011 after SodaStream reported back-to-back quarters of sales increasing 50 percent or more. Revenue growth slowed to below 40 percent and the company’s forecast disappointed investors, sending the stock plunging below $30 by late 2011.”
Such a fate is common for high-growth stocks — high growth leads to even higher expectations which, in turn, leads to ever higher disappointment. Of course, SodaStream did post a mini-comeback after the 2011 catastrophe, clawing back about $70 per share as early as last summer. But shares of SODA stock had been on a pretty determined path downward since then. In fact, earlier this month, shares sank to a new 52-week low.
The catalyst? Another weak earnings report, this time featuring flat revenue and profit that got slashed 85% year-over-year. Investors have also been concerned about competition, including a partnership between Coca-Cola (KO) and Green Mountain Coffee Roasters (GMCR), who are working to release their own soda brewing machine.
The Aftermath. Of course, the story of yesterday’s SODA stock explosion doesn’t even end there. A fun fact: Volume got so insane that the stock was briefly halted during yesterday’s trading. That didn’t really matter for the trader who made a 3,000% profit on SODA stock in a mere two hours thanks to a perfectly timed options trade.
Maybe SodaStream will have a chance at a comeback if he takes that profit and buys some home-brew beverage-makers for his humble abode.
As of this writing, Robert Martin did not hold a position in any of the aforementioned securities.