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As a stock holder of Jones Soda (JSDA) I can’t help but be worried about what their annual report for the year 2007 ended December 31st will look like. Around this time of year last year things were looking great. You couldn’t say a bad word about the company. I rode the stock from $9.41 when I bought it on 9/25/2006 all the way up to $27.82 when I sold it on April 20th, 2007. I bought back in when it was trading in the high $7s, and have been disappointed since. To check out some of my other holdings, click here.

Unfortunately this company has been facing bad news and more bad news over the past year. First off, insiders were accused of dumping their shares right around its peak when the stock started to plummet. This definitely put a negative vibe on the company that until recently could do no wrong. Secondly they had issues making money. You know a company is doing something wrong when the interest that they earn from their free cash is making more money than the company itself. This was largely due to supply issues. The company had solid deals with stores, but they could not keep their shelves stocked. If a customer comes into a store looking for Jones Soda and there is none, then they are going grab whatever else is on sale. Another big issue with the company was that their CEO Peter Van Stolk stepped down from the company leaving them searching for a replacement to run the company.

During the year Jones increased their visibility with a stadium deal with the Seattle Seahawks. They paid a decent chunk of change for these official rights and it will be interesting to see how much the deal contributed to their revenues. One must take note that the Seahawks play only eight home games per year. Being an official soft drink provider is great, but for only eight games a year doesn’t seem to make a whole lot of sense especially for a company the size of Jones. They also inked a stadium deal with the New Jersey Nets basketball team. They have yet to sell there because of pending issues with the NBA. I also believe that the deal is only good for the Nets new stadium which has yet to be completed. On the plus side though, the Nets play 41 home games per year there.

Currently the average consensus of investment firms is that Jones Soda (JSDA) is a sell or an underperform. For the 4th quarter of 2007, analysts predict JSDA to have an earnings per share of $-.03. In comparison, 4th quarter 2006 had an EPS of $.08. JSDA also seems grossly overvalued with a P/E ratio for the trailing twelve months of $230.50 compared to the industry average of a modest 21.56 P/E. If Jones’ P/E were to be at the industry average right now, they would have to be trading at $.43 per share. Ouch! As a current shareholder that does not make me very optimistic. I also have a hard time seeing Jones beat $-.03 per share as well. Personally I think this stock is doomed for the next six months until 3rd quarter 2008 earnings come out sometime in October or November. The other thing that made me nervous was that Jones postponed their earnings announcement by almost a week. I don’t take that for a very good sign.

It will be interesting to see what happens tomorrow when they release their annual report. I will give my opinion of it after I have had the time to read through and digest the report.

Update 3/10/2008: I was expecting them to do bad this quarter, but they did horrible! I think that they will eventually turn things around because they seem like they are a good and legitimate company, but things are really not looking so hot right now. Let’s take a look at some of the awesome financials they reported this fiscal year shall we?

Here is the kicker. Analysts were predicting a loss of only $.03 per share. The reported loss for the quarter was -$.39 per share. Just a slight difference. It is no wonder the stock dropped 25.12% in after hours trading.

One interesting factoid I found was that JSDA’s earnings for Q4 2007 was -$10.204M, while their earnings for the fiscal year 2007 was -$11.629M meaning that the majority of their losses took place during the fourth quarter. Interesting…

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