Straight away Captain!! SodaStream's (SODA) business has been firing on all cylinders (no pun intended) since its IPO in 2010. Since releasing Q4 2012 earnings in February, the stock seems to have stalled, although shares rose dramatically on April 11, to a 52-week high before pulling back in a similarly dramatic fashion. The volatile share price action proves to be too much to take for retail investors while the institutional investment community continues to acquire shares equaling greater than 90% of the float currently.
Some of SODA's largest shareholders are Fidelity, Real Property Investment LTD, Tremblant Capital Group, Morgan Stanley (MS), Wells Capital Management, and IDB Holding Corp. LTD. I'm sure these majority shareholders appreciated reading the most recent 20F filing from SodaStream, which was released to shareholders of interest on April 16. Not much changed on a year-over-year basis with regards to SodaStream's Annual filing, but unfortunately shares have continued to come under pressure since the release.
So with that said and as we edge closer to earnings season for SodaStream, let's look at analysts' expectations as reported through Capital IQ:
SodaStream is widely expected to meet analysts' estimates. In fact, most investors believe the company will continue its two-year long streak of surpassing analysts' quarterly estimates with another record-setting quarter for the company. Having said that, the key quarter where SodaStream will have to prove itself on the demand side of the equation will come in Q2. The company is up against a strong pipeline build in Q2, which came by way of Wal-Mart last year. Capital Ladder Advisory Group feels confident that the company can surpass analysts' estimates for this highly disputed quarter. Most analysts' reports show a strong deceleration of growth for SodaStream beginning in the 2nd quarter of 2013. As usual, CLAG feels that the analysts are still missing the big picture, which outlines SodaStream to be a very young and disruptive technology within the consumer goods and beverage category. Additionally, a foreign company like SodaStream proves to elude analysts from understanding markets outside of the United States. In a report published by Reuters CEO Daneil Birnbaum stated that 2013 financial targets are conservative. Mr. Birnbaum goes further to say, "Revenues in Europe have grown despite an economic slowdown, helped by the launch of new products which are more friendly on the environment than bottled beverages and are also cheaper after the initial outlay on a machine."
Some of the recent deals SodaStream has inked will serve to add points of distribution and sales for the company. Additionally, expansion of the existing product line will also add to demand among the existing user base. For example: Did you know that My Water Flavor Essences were not sold in the UK until this April? Additionally, did you know that SodaStream just launched Stevia-sweetened flavor syrups in the UK and several countries? Well what do you know? Most America-centric investors have trouble viewing the markets outside of the U.S., which seems to overlook the strength in the SodaStream business overseas. This is just one of the many ways in which SodaStream can continue to grow in existing markets.
Of course, investors and users of SodaStream products are awaiting the upcoming launch of V-8 flavor syrups, which will serve to create additional demand. Later in the year, SodaStream will also launch Eboost and Ocean Spray flavor syrups. With these two key licensing deals for flavor syrups occurring in the new year, analysts have to be toying with their respective estimates, trying to piece together a forecast which will include the possible demand SodaStream can acquire by way of these additional products. Lastly, analysts are also missing one more key point of interest, which CLAG aims to draw out in the upcoming Q1 2013 Quarterly Preview Report.
What most investors will be listening in for, however, is the near-term announcement of the company's entrance into either Mexico, or India. Recently, SodaStream added Poland to its global presence in a big way as the company seeks to double its door count in the nation during 2013. On the company's website, the Poland flag was also positioned. In addition to this development, SodaStream also began product sales in another previously mentioned country.
We're going to focus the last part of this SodaStream article/update by talking about another strong SODA region, Australia. In northern Australia, a program called "Kick the Can" has begun. 'Kicking the Can' is an Australian campaign to thank people for their long-standing support for a 10 cent Recycle Refund scheme and to urge politicians to support it. For 10 years Australians have lobbied for a National container deposit system but to no avail. With environment ministers meeting in April/ May 2013 to make a final decision the campaign asks people to ACT by contacting politicians, donating to the campaign, joining activities and once and for all…demanding a National Recycle Refund scheme! SodaStream is a proud supporter of Kicking the Can. If you are wondering who is strongly opposing this bottle deposit-type legislation, look no further than Coca-Cola (KO). Australia has been a battleground in recent months as Coca-Cola has been fighting against this possible legislation. The Northern Territory Government will ask the beverage industry to voluntarily continue the container deposit scheme following a recent Federal Court of Australia ruling that it is illegal, said NT Chief Minister Terry Mills. With the Government ruling the legislation illegal, citizens have taken it upon themselves to create obstacles for Coca-Cola.
A group calling itself Out Of Order has begun sticking OUT OF ORDER notices on Coca-Cola and Mount Franklin vending machines around the country "in support of the Northern Territory's 'cash for cans' scheme," says spokesman Katso. "We are committed to keep disabling the machines until Coca-Cola Amatil withdraws the legal action. Many notices have remained on machines for the three days since we started. We aim to directly affect Coke's bottom line through this action but also by encouraging people who are disgusted by this move to boycott Coke products." He says dozens of stickers have gone up in most capital cities and there is interest in France and the U.S. in supporting the initiative.
Also in Australia, a growing number of Sydney cafe and restaurant owners have launched a revolt against commercial sparkling water, spurred by the desire to reduce bottle and packaging waste and their carbon footprint. Tara Byrne, co-owner of Fleetwood Macchiato in Erskineville, installed an old-fashioned machine to make home-made sparkling water and flavored sodas when her cafe opened mid-last year. ''Making our own drinks dramatically reduces our recyclable waste,'' said Ms Byrne, who now uses a newer model. ''We don't need to have an extra drinks fridge in the cafe, so that saves on our electricity and is better for the environment.''
Say what you will about the fizzy Israeli company, but the world has certainly taken notice of the growing trend toward do-it-yourself carbonating beverages. You might be able to ban the company's commercial advertisements, but the message persists.
With shares currently trading around $50, shares are undervalued according to analysts' price targets. This is not to say shares can't get any cheaper in a poor market, but if management continues to steer the ship in the right direction, $50 a share may seem like a bargain months down the road.