SODA was one of our favorite stocks on the long side in 2013 (see here, here, and here). We haven’t traded the stock in more than 2 months, but today’s price action caught my attention. The stock is testing its 200 day moving average for the first time all year, currently trading right on that level:
While the test of the 200 day ma is intriguing, I still view the 54.50-55 area as the crucial spot of support for SODA. That was resistance early in 2013, and the breakout area in May, which held as support in mid-July.
However, the long-term picture for SODA looks more ominous after the past 6 months of price action. The stock has now pulled back from around $80 twice in the past 3 years:
The company’s earnings report was received poorly even though the actual numbers were not terrible (though the growth in operating expenses and higher inventories are a concern). Overall, this stock is still a battleground, with short interest over 40%, but long investors excited by the 25x P/E for expected earnings growth greater than 20% annually. Of course, SODA is still only a $1.2 billion market cap company. Whether that’s a positive for a potential acquirer, or a negative given potential competition from the big boys, only time will tell. In the meantime, I have my eye on $55, and the closer the stock approaches that area, the more interested I’ll become in a potential trade.