Longbow Downgrades SodaStream
Philip Terpolilli, analyst at Longbow Research downgraded shares of SodaStream International (NASDAQ: SODA) to Neutral Buy with an undisclosed price target.
“Based on our early holiday reads, we are concerned SodaStream will track toward the low end or below Street expectations for domestic results in 4Q,” the analyst wrote in an equity research report.
Terpolilli noted that demand was most favorable at Bed, Bath, & Beyond (NASDAQ: BBBY) where the company benefited from incremental shelf space and promotional activity. Sales at Wal-Mart (NYSE: WMT) were strong but that could be due to the fact that the retailer offered a $25 gift card and a half dozen various flavors and accessories kit. Negatively, demand at Wal-Mart was reported to be “modest” when the product was offered without any promotional activity.
The product received mixed demand when it was introduced at Costco (NASDAQ: COST) due to limited promotional support and lack of flavors and other products being sold.
The company experienced “lackluster demand” at Williams-Sonoma (NYSE: WSM) due to limited promotional support.
Terpolilli noted that the company should have seen higher sales during the holiday season given new product introductions, increased consumer awareness and a limited household penetration compared to several other countries.
“While SodaStream could certainly make up ground over the next several weeks, our results indicating modest year over year growth is likely below Street expectations,” the analyst wrote before defending his Neutral rating by stating “We therefore see limited upside in the near-term”
Longer term, the analyst sees the company improving its gross margin when its new manufacturing facility will be fully operational in 2014. The company may benefit in 2014 from increasing consumer awareness by advertising during the Super Bowl again.
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