Monday, August 15, 2011

Is Cramer Correct About SodaStream?

Last Thursday, SodaStream (SODA) reported results that easily surpassed quarterly estimates. The stock unfortunately plunged roughly 34% due to guidance that was puzzling. The company guided to flat growth in Q3/Q4 while the street was expecting a massive Christmas for the home beverage carbonation market. The confusing part was whether the company was being conservative or whether the street just doesn't understand the revenue model.

SODA reported Q2 revenue increased 38% with the less established Americas up 136%. Remember this is an Israeli company that first expanded in Europe. Adjusted earnings jumped to $.42 with Americas soda makers units increasing 224%.

All numbers that would lead analysts to expect numbers to only soar from here in Q3 and especially Q4. Instead the company only forecast revenue that assumes a 20% growth rate from 2010. Numbers that suggest a massive deceleration from Q2 growth of 38%. Not the growth you want in high multiple stock.

During the conference call, analysts asked numerous questions regarding the guidance. Apparently only the US market produces higher numbers in the 2H and that it traditionally had seasonal drops in the past. It was also confusing on when SODA counts revenue with a hint that store deliveries have been pulled forward. Still with America revenue soaring in Q2 it doesn't add up that revenue growth would only reach 20%.

Management sure appears to be sandbagging with no indications that demand is weak. Cramer though went very bearish on this stock (see video below) apparently taking the company word for word as if guidance wasn't surpassed in the past. He also was negative on the Costco comments though I'd rather see them kick them to the curb than accept a less than attractive situation. The reference to Apple (AAPL) only further highlights that being selective can be better than being everywhere.

Was the market and Cramer correct to sell? Is management overly conservative? Or the sales model just misunderstood? It is very difficult to grasp the reality in this situation. Demand appears to be high, but sales guidance was lame. Doesn't add up which is why Stone Fox Capital wouldn't be surprised with numbers hitting 30% growth.

Gross margins jumped to 53% compared to 50.7% in 2010. As we suggested in this article, margins were key to the future of SODA. Considering they continue to ramp up, it doesn't appear that SODA has any issues.

Via SODA PR:


  • Revenues increased 38% to Euro 53.3 million
  • Americas revenues increased 136% to Euro 11.3 million
  • Adjusted diluted earnings per share was Euro 0.29 or $0.42*
  • Revenue from soda makers increased 36% to Euro 22.7 million
  • Revenue from consumables increased 54% to a record Euro 29.8 million
  • Flavor units increased 96% to a record 6.1 million
  • CO(2) refill units increased 34% to a record 3.2 million
  • Americas soda maker units increased 224%
  • Americas consumables revenue increased 203%

Impressive numbers but Cramer has a take that SODA was just a fad that's time has already come. For now, we'll just continue watching the stock for price action and a possible great long term entry point. 




Disclosure: No position in SODA. Please review the disclaimer page. 



No comments: