Sodastream International Ltd (SODA) has been one heck of a roller-coaster ride for investors over the last few years. SODA stock is down about 25% from its late 2010 initial public offering, but depending on your entry or exit you could have made a boatload of cash … or lost even more.
Most recently, SODA stock topped out over $70 a share in mid-2013 on news PepsiCo, Inc. (PEP) could be acquiring the company. That rumor came to nothing, and Sodastream stock then started a downward spiral for the next year based on weak earnings reports and overall disappointment among investors.
Shares recently bottomed at a 52-week low just north of $20 per share — a hard fall, considering last year’s optimism for the quirky maker of kitchen appliances that allow you to make carbonated drinks at home. And with Sodastream earnings just around the corner, some investors may be tempted to make a bargain buy in SODA stock.
Don’t do it. Sodastream International Ltd. lacks any pop right now, and is certain to leave a bitter taste in your mouth.
Sodastream Earnings History Shows Trouble
The bottom line for SodaStream, despite all the rumors of acquisitions and hopes for growth, is still the bottom line.
SODA stock has been struggling in large part because profits have been harder to come by since peaking in 2012. In fact, SodaStream started the year with a pre-announcement of earnings that showed an ugly drop in profits for the fourth quarter; numbers were so bad that, apparently, management just wanted to tear the Band-Aid off and deal with the pain sooner rather than later.
Click to EnlargeProfits have been pressured ever since, but sales have started to slump lately as well. The company barely posted revenue growth in its fiscal first quarter, and its Q2 report showed a sales growth rate of less than 7%. Just look at the long-term history of earnings and sales here and you’ll agree that the biggest reason SODA stock has seen waning momentum is because its numbers are fading, too.
Of course, at least there has been some kind of growth … and that has managed to keep SodaStream bulls from completely throwing in the towel.
However, given the deceleration lately and pessimism around the stock, we could see that growth turn into a sales decline very soon — perhaps even in the upcoming SodaStream earnings report later this week.
If that happens, expect the pain for SODA stock to continue.
Now, one glimmer of hope is that short interest in SodaStream stock has been waning. But keep in mind that a big driver of momentum stocks like this is actually a short squeeze after a favorable news report — either buyout talk or strong earnings — forces the bears to cover their short positions.
There’s a chance that SODA earnings could wow investors and that the resulting buying and short-covering could send this company soaring. But given the volatility lately and the fact that SODA stock was halted amid big declines already this month, it doesn’t look good.
To me, the most damning thing of all is the very fad nature of kitchen gadgets and the sad reality that SodaStream devices are ultimately garage sale bait. Like the George Forman grill, RonCo rotisserie ovens and other fads … these things are fun for a few years and then fade into the ether.
Something else will replace SodaStream enthusiasm in the kitchen. So before you get another drubbing around SodaStream earnings, I’d replace SODA stock in your portfolio with something else.
Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. As of this writing, he did not hold a position in any of the aforementioned securities. Write him at editor@investorplace.com or follow him on Twitter via @JeffReevesIP.
