Bubble Trouble: SodaStream Shares Fizzle on Profit Warning

Israeli company says fourth quarter was disappointment and sees ‘challenging’ start to 2014.

Shares of SodaStream, the manufacturer of devices for making fizzy drinks at home, saw its shares plunge more than 20% yesterday after it said profits would be less than the company expected and that the trouble would continue into 2014.

Revenues will likely reach about $562 million, while adjusted net income will be $52.5 million, the company said. Its prior outlook was for net income of $54 million on revenue of about $567 million. Analysts, on average, had expected revenue of $564.3 million, according to a FactSet survey cited by the Associated Press.

“Despite achieving all-time record sales, we failed to deliver our profit targets and are disappointed in our fourth-quarter performance,” said CEO Daniel Birnbaum. He blamed this situation on a “challenging” holiday season in the United States, characterized by lower sell-in prices and higher product costs, and unfavorable foreign exchange rates.

“While we expect some of these headwinds to continue into the first half of 2014, we are moving quickly to implement the necessary measures to restore margins to historical levels in the coming year,” Birnbaum added.

The news came two days after the company won global media attention after announcing it was using the actress Scarlett Johansson to promote its beverage carbonation systems at this year’s U.S. Super Bowl broadcast.

The devices enable users to turn tap water into sparkling water and carbonated soft drinks. The company, which trades on the Nasdaq but is headquartered in Israel, earns most of its revenues selling gas refills and flavors for it.

Shares of SodaStream were down 22% to $38.90 in trading in the early afternoon, New York time.

“We expected some weakness in U.S. sales but are surprised by the magnitude of the company’s gross margin and earnings miss,” Jim Chartier, an analyst at Monness Crespi Hardt & Company, said in a report cited by Bloomberg News yesterday.

He downgraded the stock to Neutral from Buy. “While we continue to believe in the story longer term, we are moving to the sidelines until we have greater clarity on the company’s gross margin issues,” Chartier said.

Bloomberg