The Glass Is Half-Empty by Christopher C. Williams
Summary: Jones Soda's (OTCQB:JSDA) expensive, funky sodas excite investors who've bubbled shares up 256% since August on frothy earnings expectations and takeover rumors. But shares trade at 170 times 2006 earnings ($0.13/share), and 120x 2007's $0.17 EPS, while rivals Hansen Natural (HANS) and giants Coca Cola (KO) and PepsiCo (PEP) trade at mid-teen P/Es. Even a wide 20 P/E for JSDA would denote $7 shares, to the current $21.24. At a 13x sales share price vs. an industry average of 2.5x sales common for takeovers, Jones is too expensive. CEO Peter Van Stolk and other Jones execs are offloading shares as did large stakeholders like Bjurman Barry Small Cap Growth Fund-- citing extravagant multiples, flat Q1 sales and boring sales growth. Short-sellers own 20% of outstanding shares. Initiatives with WalMart (WMT) and a concentrate deal with distributor National Beverages could supply 27% of 2007's estimated $58m revenues, and Jones' (as yet unproven) "healthier soda," launched Memorial weekend with sugar cane-based drinks, might contribute towards $5m in profits on 2007 revenues, and $9m on $74m revenues in 2008, but PepsiCo's reportedly brewing up sugar cane too, and a former Glass Lewis analyst says it's all largely priced in already anyway. Barron's Bottom Line: Even above industry averages, shares should be 65% lower.
JSDA 1-yr. chart: