Scarlett Johansson; The First Catalyst For SodaStream In 2014

The manufacturer of home beverage carbonation systems SodaStream International SODA issued a warning earlier in the week indicating it was lowering its fiscal 2013 guidance after sales from the Christmas holiday came in lower than expected. SodaStream is the leading manufacturer and distributor of home beverage carbonation systems, which loyal customers use to convert ordinary tap water into carbonated soft drinks and sparkling water. The company promotes its products with a environmentally friendly, health and wellness element to them. In its preliminary numbers, the company expects Revenue to be approximately $562.0 million vs its Q3-2013 projection of $567 million, Adjusted net income to be around $52.5 million vs its Q3-2013 projection of $65 million. It estimated that Net income would be $41.5 million. Essentially the company came within $5 million of its revenue target, but fell quite short of its earnings projections. This is the second quarter in which the firm has missed its earnings target.

So what happened?

A challenging holiday selling season, lower sell prices, unexpected higher product costs, and currency exchange issues, all contributing to the underperformance. The company has an overall revenue guidance of reaching $1 billion in annual sales by the year 2016. One note to consider is that SodaStream grew its revenue to nearly 30% for the entire 2013 period.

But apparently the market makers sensed fear with the disclosures, despite overall revenue growth, and similar underperforming results from other retailers for the season, sending the shares down to a 26% drop, down about 50% from 2013 highs. SODA is trading at current day $38.00, but still on the bottom of its 52wk Range of $36.38 – $77.80. Several analysts believe the sell off provides an entry point opportunity. Other are looking at a $30.00 range as an entry point. The panic sell off did not reach over the aisle to other carbonated beverage players such as Coco-Cola KO (a Warren Buffett favorite) and PepsiCoPEP so it does not appear to be a industry-wide downgrade. There has always been discussion that the in home carbonated beverage maker was a trendy item, but again, revenue for 2013 gained nearly 30% not at all indicating that SodaStream products have become unpopular with consumers. SodaStream products are available at more than 60,000 retail stores in 45 countries around the world, including over 15,000 retail stores in the United States.

Enter Scarlett Johansson as a catalyst

So what’s ahead for SodaStream? Enter 28 year old superstar actress Scarlett Johansson and the U.S. Super Bowl football game. The company announced that Johansson will be featured in the upcoming Super Bowl XLVIII ad on Sunday, February 2, 2014, and become the face of a new marketing campaign. Her role is what the company calls a Global Brand Ambassador. Johansson is apparently a long term fan and user of the product and company officials are confident that her face on the company’s campaign will assist consumers embrace the home soda making concept even more, and help it become the future of the beverage industry. She is essentially the first catalyst event of 2014 for SODA.

While beauty and star celebrity as a spokesperson has proven to be significant for many firms in the past, investors and analysts still measure performance by numbers. SodaStream’s fourth quarter results may disappoint, causing further stock price degradation to low 30′s, a good buy-in opportunity as well. But if it keeps its revenue growth up in Q1-2014, and improves its Net, the market will likely respond positively and could see a return to a mid-52wk range of 50′s. The Scarlett factor may be the first catalyst event for that upward climb. As a note, in the first six months of 2013, the stock gained nearly 62%, then declined in the second half to the stream of 32%, but still closed the year up 9.5%.

Disclosure: None.

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