Remember the good 'ole days, when you could buy a can of soda
for less than 75 cents? Now, you pay nearly triple this price at
most convenience stores. Wouldn't it be nice if there was an
Thanks to a growing Israeli company called
Soda Stream International (Nasdaq: SODA)
, there is.
Soda Stream is the world's leading maker and distributor of home
soda-making systems. Selling more than 10,000 machines a day, the
company's products are available in more than 60,000 stores across
45 counties and counting. This coming year, Soda Stream plans to
expand into India, Mexico, China and Greece.
The product is so desirable because for a base price of around
$80, you can get a machine that quickly turns tap water into
delicious carbonated beverages. Collaborating with
Kraft Foods Group (Nasdaq: KRFT)
, Soda Stream currently offers about 150 syrup flavors. These
flavored syrups have 66% less sugar, sodium and calories than a
typical carbonated beverage, making them a healthier alternative to
a regular can of soda. And, of course, you'll be doing your wallet
a favor by making your own soda pop, instead of spending around $2
each time you purchase a brand-name can.
As a relatively new company, which went public in November 2010,
Soda Stream is still trying to gain consumer brand awareness. To
help achieve this goal, the company is undertaking a global
Recently, Soda Stream introduced its first television
commercial, which ended up being banned in the U.K. Regulators
there argued the ad denigrated traditional soda companies.
Ironically, the ban created more buzz. More than 1.3 million
curious viewers have now watched the ad on YouTube, bringing Soda
Stream an outpouring of free publicity.
Soda Streamwill be paying about $4 million for its next attempt
at publicity. The company plans to air a 30-second commercial
during the 2013 Super Bowl in February. Soda Stream hopes the Super
Bowl ad will generate a true thirst for its product in the United
States. Currently, only 28% of all sales are in the United States.
This figure means the potential for enormousmarket penetration in
the future, as more North Americans learn about Soda Stream.
Technically, the stock shows strong growth potential.
The company went public in November 2010 at $20 per share, and
then quickly climbed to an all-time high near $80 by July 2011.
However, upon hitting this peak,shares fell just as quickly,
dropping to a low of $27.85 by September 2011.
Around this level, the stock found important support. For the
past year-and-a-half, shares have bounced between support and
important resistance near $48.20. As a result, the stock has become
trapped in a rectangular-shapedconsolidation , or holding
Currently, the stock is testing a shelf of historical resistance
dating back to November 2011. If shares can definitively break this
resistance level, they could easily pop up to the $48.20 resistance
point. This level represents keyoverhead resistance.
If the stock manages to break $48.20 resistance, then the
long-term holding pattern would be bullishly broken. In this case,
no nearby historical resistance would be in sight. Shares could
feasibly retouch their all-time high near $80. At current levels,
thisprice target means the stock could potentially double in
Thebullish technical outlook is supported by strong
fundamentals. Due to increasing demand, especially in Western
Europe and the Asia-Pacific region, analysts expect full-year 2012
revenue will increase 47%, to $423.9 million, from $289 million
last year. In the first quarter of 2013, analysts expect
international expansion, in regions like India and Greece, will
help push revenue up 21.5% to $106.8 million, from $87.9 million in
the comparable year-ago quarter.
Theearnings outlook is similar. With confidence holiday sales
will be strong, analysts expect full-year 2012 earnings will jump
31%, to $2.10 per share, from $1.60 per share last year. For the
first quarter of 2013, analysts project earnings will rise 33% to
64 cents per share, from 48 cents per share last year.
In addition to a strong fundamental outlook, the company appears
well-valued with a five-year expectedPEG (price-to-earnings divided
by growth rate) ratio of 0.61. A PEG of 1 or under typically
showsfair value .
The company is also cash-rich with $50.7 million incash and no
debt. This financial liquidity should give Soda Stream the freedom
to continue marketing its brand and developing new products, like
soda syrup flavors.
Risks to consider:
Soda Stream is a relatively new company with relatively little
consumer brand awareness. The company is aggressively marketing
itself through TV advertisements, but these ads may not reach the
company's full targetmarket . In addition, a "do-it-yourself" (DIY)
soda pop machine may be a fad that could come and go. However, for
now, the company seems to be gaining more and more popularity and
Action to Take -->
Buy SODA if shares break above $43.08. Set stop-loss at $38.58, a
shelf of support. Set initial price target at $48.12 for a
potential 12% gain by mid-2013; longer term, the stock could hit
$79.72 for a potential 85% gain.
This article originally appeared on TradingAuthority.com:
This Unique $40 Stock Could Be on Its Way to
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