I admit, CAPS is fun and you don't always have to do research to thumb up/down a stock. And when I saw people writing that Soda Stream was over sold, having fallen to under $50 after peaking at almost $80, I took a quick look at the company description.
Wow, I thought. What a great idea - personal carbonation products. Lots of people pay good money for soda and seltzer. Then I saw the market cap of nearly $1 billion! The Dr. Pepper/Snapple group has a near $8 billion market cap and pays a 3.5% dividend yield. So I thumbed down SODA.
But since then (I'm currently up on downing of SODA by about 18 pts, just one week ago), I've looked a litttle closer. You know, in this down economy, if people can save money they will do it. Maybe this is the little company that could.
So I went to their website, and saw that I could buy a large 33oz carbonator for ~ $50. I also noticed that once you exchange the 33oz carbonator, the price drops by 1/2 to ~ $25. Considering you can make about 60 2liter bottles of soda, your cost to simply carbonate water could be as low as 42¢ each. This is less than 1/2 the price of competitor iSi.
However, iSi uses a simpler system that can carbonate anything - orange juice for example. The soda stream can only carbonate water.
Now, you want to make soda! You have to buy their Soda flavor and mix it to the carbonated water you just made. Cost $5-7 and each bottle makes about 6 2liter bottles, or about $1 each.
OK, so I want to make my own soda and it's going to cost me $1.42 per 2 liter. Knowing full well the regular price of soda at the grocery store is $1.49, and sale prices range from 99¢ to $1.29.
And let's not forget the prices I've estimated above are AFTER you've already spent about $100 just to get the unit. So for zero cost savings, questionable cola taste, and the inability to carbonate other liquids, you still have to shell out $100?
Wait, wait, wait! You're missing the point - their bottles are reusable, so they're green. And we all know how the green market pays more for stuff that's environmentally positive.
The green market makes zero sense for this product. Soda is the antithesis of what most earthy, crunchy, pro-environment users believe in. Couple that problem with the fact that most states recycle plastic bottles, and the argument is moot.
I stick by my original, knee-jerk reaction. This company juiced sales after their IPO by selling deeper into the distribution channel. Expect a fall into the teens and then single digits. Personal carbonation has been around for decades and Soda Stream isn't changing the paradigm, they may actually be making it worse.