A Refreshing Prospect
Patrick is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Despite fostering a stock price that has fizzled out over the past year, SodaStream (NASDAQ: SODA) relentlessly continues to chug along in hopes of quenching investors’ thirst for profits, and that prospectus is looking quite refreshing. Qualms have arisen in the once praised “razor-blade” business models of its cohorts, but SodaStream is diligently strengthening its own brand, independent of others. Although the consensus still appears reluctant to take a sip from this company, they’ll be contrastingly parched if SODA finally manages to pop the top off of their currently bottled up price.
The emergent homemade soda company has continued to bubble with success in their business, experiencing a sweet revenue growth of about 50% and profit growth of 84% last quarter -- nothing out of the ordinary for this company though, as it’s been dousing the Street with earnings beats for most of its two-year tenure as a public corporation. The stock was rewarded with a 30% pop on these strong first quarter earnings, but only to be quickly shot back down to its restrained trading prices in the low 30s. Even with their screaming growth and groundbreaking earnings reports, the soda connoisseur just can’t seem to convince the market that they’ve got what it takes.
They might be able to unkindly thank one of their peers for dirtying a part of their image. The dramatic calamities involving Green Mountain Coffee Roasters (NASDAQ: GMCR) have unfortunately cast a shadow of doubt onto SodaStream because of their blatantly similar business models. Green Mountain once flaunted insane growth and strutted around with similar numbers in their early stages, only to spiral out of control when that momentum flatlined, and the rest is history.
However, other than their concurring dissolution of stock price and comparable fundamentals, the two companies shouldn’t be cuffed at the ankles. Green Mountain’s management -- or lack thereof -- simply lost control of the ship in the worst patch of sea possible. The stock was in the midst of heavy scrutiny due to a chain of bearish events and their stock’s survival hinged on a positive earnings report that they just couldn’t pull together. As a legitimate and beloved consumer beverage company, Green Mountain isn’t toast, but they certainly have some internal reparations to be accomplished that should then prelude a significant recovery. SODA hasn’t been engaged in any problematic matters of this sort, has actually raised guidance and more than likely took note of everything NOT to do from GMCR to sustain its momentum -- they deserve a chance to decide their own fate.
SodaStream is holding its own thus far in the industry, but where the herd is the water shall flock…wait, is that right? It is in this case. Primo Water (NASDAQ: PRMW) has begun tapping into this sparkling beverage market with its Flavorstation that is intended to be a direct competitor of SodaStream. This is a tasteful deviation from its variety of water, but SodaStream will win over the majority of the Flavorstation’s intended market for a reason more than a name allusion -- product specialization. I hate wearing his name out, but Steve Jobs gave the same reason for why people would favor Apple products over Microsoft’s -- because they were the heart and soul of the company, not just mediocre additions intended to increase exposure. This is what I see PRMW’s attempts with Flavorstation as -- a deviation from their company’s focus, which had always appeared to be specialized water, not soda.
After recording 50% growth in 2011 and projecting the same for 2012, SODA seems to be making this colossal growth a recurring theme. Now streaming through 50,000 retail outlets in 42 countries worldwide, they have the type of global exposure to continue fueling that growth. Direct competition seems meager and not much of any headwind has confronted this company yet, which should only prime its future. Soda pop might be considered unhealthy, but a SODA pop here could prove quite invigorating for its investors.
Patrock19 owns shares of GMCR. The Motley Fool owns shares of SodaStream. Motley Fool newsletter services recommend Green Mountain Coffee Roasters and SodaStream. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. If you have questions about this post or the Fool’s blog network, click here for information.