Caution on Momentum Plays
"Investors must have discipline to play with momentum stocks," Cramer told viewers, as he examined the meltdown in Sodastream (SODA), which lost 34% of its value last Thursday as the company's forecasts imploded.
Cramer first got behind Sodastream at its U.S. IPO last November. However, he started recommending investors take profits in the company in July after shares soared 288% higher on its growing momentum. That warning was spot on last Thursday when the company reported a two-cent-a- share earnings beat on a 38.5% increase in revenues.
Cramer explained that Sodastream's growth was simply not enough for a high-flying momentum stock and the situation was made worse by the company's forward looking guidance which forecast sharply slowing growth.Making matters worse, Sodastream executives said that they still haven't committed to selling their products at retail giant Costco (COST), a retailer Cramer said is "too big to ignore." Additionally the company's planned expansion into restaurants was revealed as only including sparkling water, a major disappointment for analysts. Cramer called Sodastream's forecasts "a complete bust," effectively pulling the rug out from under its shareholders. Cramer said he's surprised that shares were only cut in half given its sharply declining growth. By contrast, Green Mountain Coffee Roasters (GMCR), makers of the Keurig one-cup coffee brewers, delivered a fabulous quarter with fabulous guidance to boot. "Sodastream is no Green Mountain," concluded Cramer, which is precisely why investors must use caution when investing in momentum stocks. He urged investors to use any lift in Sodastream to sell their remaining shares.