Are SodaStream's best days behind it?
The fad of making your own soda has fizzled.
Shares of the soda machine maker plunged more than 13% after the company reported that unit sales growth had slowed to 8% from 60% in the third quarter. Investors were floored by the news.
"Until we have further clarity on the deceleration in soda maker unit sales, we see reason for pause," Stifel Nicolaus analyst Jim Duffy said, according to Bloomberg News.
Aside from the dramatic plunge in growth, the rest of the results were pretty good.
Net income for the three months ended Dec. 31 was $5.5 million, or 26 cents a share, up from $4.7 million, or 28 cents a share. Revenue rose 32% to $85.7 million, beating the $81.2 million estimate of analysts surveyed by Bloomberg.
Sales in the Americas rose 70.2% in the quarter and gained 20.5% in Western Europe. Gross margins rose to 57.3% as SodaStream expanded a U.S. footprint that includes Target (TGT), Costco (COST) and J.C. Penney (JCP) as retail clients.
But signs are growing that the SodaStream bubble is about to burst. Sales and marketing expenses for the fourth quarter rose 49% to $37.5 million as SodaStream ratcheted up its advertising spending with its first television campaign. The expense equaled 42.5% of revenue compared with 37.9% of revenue for the same quarter last year.
The company unveiled plans Wednesday to cement its foothold in America, its largest market, where it more than doubled its retail locations last year to 9,500. The expansion has paid off. Sales of soda makers in the U.S. rose 113% in the latest quarter, while revenue from carbon-dioxide refills and flavors rose 98% and 132%.
SodaStream will have difficulty topping itself. The company's sales growth will begin to falter as the make-your-own-soda fad runs its course. There are plenty of coffee snobs and beer lovers who will pay premium prices to drink premium products. When is the last time you ran into a fan of gourmet soda?
SodaStream solves a problem people didn't know they had, advertising that it frees customers from "lugging heavy, bulky bottles and cans from the store" by making beverages in reusable containers. But that's not enough. The company also must convince the public, which has been drinking less soda for years, to take a chance on its carbonated beverages.
--Jonathan Berr would hook up Coke Zero to an IV if he could. He is long Target.
Copyright © 2014 Microsoft. All rights reserved.
After enjoying a smooth rise in stock prices since May, investors are about to be hit with another bout of volatility.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.