SodaStream Popping

 | Jan 17, 2013 | 3:30 PM EST  | Comments
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Remember the whole SodaStream (SODA) controversy a few years ago? Was it a fad? Did making your own soda at home really save you money? Jim Cramer and Herb Greenberg even did a taste test on CNBC.

After the stock was crushed in 2011, SodaStream spent 2012 trading sideways. Now it's back: Shares have climbed almost 44% since Nov. 19. Earlier this morning, the company held an upbeat presentation at the ICR XChange Investors Conference in Miami that is sure to get things popping. Since I've been a critic in the past, I listened to the company's presentation.

As you may recall, SodaStream had been the one and only "home carbonation system" on the market -- and the company now claims to have a 95%-to-100% market share. The company believes it has six million active users in 45 countries. (An active user is defined as someone who refilling his or her CO2 canisters at least three times a year.) Apparently the Swedes love their SodaStream machines. The company claims to have a 25% market share in Sweden.

The company doesn't view itself as an appliance maker; it sees itself as a beverage company competing in the multibillion sodas-and-sparkling-water business. That said, the machines are sold in more than 60,000 retail stores worldwide, and in about 15,000 stores in the U.S. The company manufactures its own machines in 20 production facilities in nine countries.

While I've previously written off SodaStream as another trendy small appliance you don't need -- think home bread maker or tabletop herb garden -- the company seems to be making headway. In the last 12 months, the company has sold the equivalent of 3.5 billion cans of soda. The Americas represented 33% of sales and reported 80% year-over-year growth. Western Europe generated 49% of sales and reported 31% revenue growth. In the Asia-Pacific region, which comprises just 10% of sales, revenue grow 124% off a small base.

In early November, the company beat the Street earnings estimates by $0.10 per share and raised its revenue guidance. Revenue for the third quarter rose 48.6% year over year to $112.5 million, and gross margin was basically flat at 54.2%. Management also raised net income guidance for the remainder of the year -- to a climb of 59%, up from the previous estimate of 55%. Total revenue for 2012 is expected to be $421.9 million, up 46% vs. the consensus of $412.6 million. For the year, the Street is expecting earnings per share of $2.10.

The stock has been rising as the growth crowd has jumped back on the bandwagon. For 2013, the Street is estimating revenue of $508 million and a profit of $2.70 per share, and the stock has recently caught a whole bunch of upgrades from analysts.  Later this summer, SodaStream is expected to announce a "single shot" machine that can make the user a single glass of soda. The new machine could add some extra fizz to the company's results. All in all, I think shares could pop to the mid-$50s before valuation questions take the sparkle out of the shares.

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