NASDAQ: SODA
Introduction:
SodaStream is an Israeli company which produces home carbonation systems, turning water into carbonated soft drinks and sparkling water. SodaStream is environmentally friendly, convenient, customizable, and healthier than soda. SodaStream’s current stock price is $47.31, Market Cap is $1.06 B, revenue is $476.1M, EBITDA is $75.8M, net income is $44.5M, and EPS is $2.07.
Recommendation:
Long with a target price of $53.16
Tailwinds:
Increasing focus on healthy alternatives and environmentally-friendly options; Activist investor Teleios Capital disclosed a 5.7% stake in the company; Recent investments in human capital and production (invested in a new manufacturing facility); Many new markets to enter and room to grow in existing markets
Headwinds:
Has grown significantly in the past few quarters, so it is possible that growth is slowing down and has hit an inflection point already
Summary:
We believe some tailwinds that will drive an increase in stock price are the increasing focus on healthy alternatives and environmentally-friendly options combined with significant room for growth in both new and existing markets. We have seen increasing sales in US and European markets over the past two quarters, and the company believes it has more room to grow. Plus, they have recently implemented a successful five-part growth plan, which emphasizes organization, marketing, product and innovation, distribution, and operations. For example, the company has recently invested heavily in human capital and added a new manufacturing facility to improve efficiency. In addition, activist investor Teleios Capital disclosed that it has a 5.7% stake in SODA, which is a positive sign. However, the stock price has increased rapidly over the past year, so it is possible that Soda Stream is overpriced and/or has hit an inflection point where growth will start to slow down.
SodaStream’s earnings for Q1 and Q4 may be the weakest because people drink less water in cold months, though the company does sell more machines around the holiday season. On the other hand, a possible catalyst is warm weather as beverage consumption increases.
Overall, we recommend that investors LONG SodaStream.