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SodaStream: From Fad To Fixture

|Includes: SodaStream International (SODA)

Web Search Interest for SodaStream has spiked up recently along with the stock price. There are several reasons the increased interest. First, on Nov 7, 2012 SodaStream raised revenue and net income guidance. 2012 revenue guidance was increased from 40% year over year growth to 46% and guidance for net income increased by 50%, up from prior guidance of a 47% increase. During the earnings conference call management did say that gross margins will decline in 4th quarter due to unexpected expenses related to Super Storm Sandy and the need to airship parts due to higher than expected demand for product.

SodaStream is being sold this holiday season in the big box retailers. There is rising web search interest for SodaStream Wal-Mart up 250%, SodaStream Target up 120% and SodaStream Costco up 16% and there is rising search interest in CO2 refills and flavors up 90%.

On Nov 8th, SodaStream began running a controversial TV ad campaign: "if you love the bubbles set them free". The TV ad has been banned in the UK on the grounds that "it denigrated the bottle drinks industry". The ad shows thousands of bottles exploding. It's provocative. but no more so than birds covered in an oil slick.

Green Mountain Coffee is another contributor to interest in SodaStream. Wall Street has heavily shorted SodaStream saying that it is a fad like Green Mountain Coffee's Keurig coffeemaker. When Green Mountain (Symbol GMCR) beat earnings estimates the stock popped up, in part due to short covering. SodaStream, likewise, has a large number of shares sold short ; almost 50% of the outstanding shares are short. If the stock continues to go up, it is likely that the shorts will be forced to cover.

During an Investor conference held on 12/6/2012, SodaStream indicated that they have plans for a single serve option. In addition, they are actively working with kitchen appliance manufactures to incorporate SodaStream on the door of the refrigerator along side water and ice; expect to see it in 2013. This would be a big deal. While I initially liked the product because it reduced my need to schlep and store cans of soda, having it built into the refrigerator is even better. Lookout Brita.

Seems to me that SodaStream is morphing from fad to standard fixture in our kitchens.

I am long SodaStream.

Disclosure: I am long SODA.