Sodastream (SODA) stock was halted in premarket trading Tuesday ahead of an announcement from CEO Daniel Birnbaum, who had some bleak news for SODA stock holders. He warned that the company, which makes home beverage carbonation systems, will announce intolerably lackluster third-quarter results when Sodastream reports earnings on Oct. 29.
Birnbaum didn’t beat around the bush, saying “we are very disappointed in our recent performance,” and even going so far as to say that Sodastream’s results would be so awful they showed that the company needed to “alter our course.”
The actual numbers: Sodastream expects to do $125 million in sales in its fiscal third quarter, or nearly 20% less than the $153.6 million consensus Wall Street estimate.
SODA stock resumed trading after the announcement, and unsurprisingly, shares immediately started free-falling, tumbling nearly 20% in early Tuesday trading.
Even before today’s precipitous drop, SODA stock had been performing terribly, declining almost 60% in the past year alone. And shares have floundered against the current — the S&P 500 has gained more than 16% in that time.
While Sodastream certainly is a unique company, much of the buzz that once surrounded it has disappeared as consumers haven’t fully gotten on board with the idea of brewing their own soft drinks at home.
In 2013, Sodastream created a Super Bowl ad attacking traditional beverage industry giants PepsiCo (PEP) and Coca-Cola (KO), but it was neutered a bit (likely to appease the NFL’s and networks’ larger sponsors). In one, various people joyfully activate a Sodastream, and in response, several brandless bottled sodas (which previously were Coke and Pepsi bottles) begin to pop and spill everywhere.
Unfortunately, SODA stock hasn’t been quite as explosive.
The carbonated beverages industry in the U.S. is actually in a slow but secular decline, with energy drinks actually representing the most exciting growth opportunity in the area. While Coca-Cola and PepsiCo are obviously largely concentrated around their soda offerings, they are widely diversified, and both own popular energy drink brands. Coca-Cola owns Full Throttle, Nos, Power Play and Mother, while PepsiCo owns Amp.
For a growth issue like SODA stock, severely disappointing on revenue is a recipe for disaster. Sodastream can and is trying to shift its marketing strategy from an environmental focus to a nutritional one, branding itself as a healthier alternative to traditional soft drinks.
We’ll see how that works, but for now, SODA stock likely will continue to implode as the market is reluctant to adopt an entirely new way to consume.
As of this writing, John Divine did not hold a position in any of the aforementioned securities.
