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Is Sodastream International Ltd (SODA) Still a Buy?

Sodastream International Ltd (NASDAQ:SODA), the world’s leading manufacturer and distributor of home beverage-carbonation systems, reported record first quarter sales that provided it with a strong start to the year. The company enjoys a first mover advantage in this segment by providing a legitimate alternative to traditional soda. Now, the company is looking at ways to pull off a similar or better performance in the coming quarter as well. Soda Stream’s primary focus is winning new customers through advertisements, public relations endeavors, and staying at the top of potential customers’ minds through social media engagement. The company even plans to roll out new soda caps in selected markets during the summer, and new diet flavors as well.

Is this going to be enough for SodaStream to turn the beverage industry upside-down and take on the biggies of the industry such as The Coca-Cola Company (NYSE:KO) and PepsiCo, Inc. (NYSE:PEP)? Let’s take a look.

SODA vs. KO and PEP
This "Coca-Cola Killer" is a Great Holiday Growth Stock to OwnSodastream International Ltd (NASDAQ:SODA) has an edge over Coca-Cola and Pepsi in terms of calorie content and convenience. In today’s world where obesity is a growing issue, SodaStream’s offerings have one-third of the calories that other soda makers provide. Additionally, the company offers easily-available soda at home that eliminates the need to continually purchase cola drinks. The Coca-Cola Company (NYSE:KO)’s Diet Coke is the second most popular drink in US, showing that people are more diet-conscious nowadays and reinforcing SodaStream’s lower-calorie advantage.

One bottle of cola syrup from Sodastream International Ltd (NASDAQ:SODA) costs $4.99, and that bottle produces 12 liters of cola (or around 33 cans.) That’s about $0.15 per can, compared to the average $1.00 to $1.50 for PepsiCo, Inc. (NYSE:PEP) or Coca-Cola products that have similar flavors, but are tagged with a well-known brand image. If one makes an initial investment of $100-$200 for the SodaStream machine, one will save money in the long run by making his own soda at home.

Customer response
In a survey conducted by the company, it was found that unaided brand awareness for Sodastream International Ltd (NASDAQ:SODA) increased from 25% to 38% since last July. More than 70% of the consumers surveyed are still using their SodaStream machines after one year and 80% of the users are using it at least once per week. The numbers are clear indicators that users are sticking with the product once it’s purchased.

The Wall Street perspective
Now let’s talk about numbers. Since the beginning of 2013, SodaStream’s stock has increased around 21.81% to reach $53.11 per share as of May 8. The company has shown a stellar performance with an 81% increase in stock value since May 9, 2012, whereas in the same time frame Pepsi and Coca-Cola have only increased by a little over 25% and 10%, respectively.

(Source: Google Finance, May 8, 2013)

Earnings analysis
Sodastream International Ltd (NASDAQ:SODA) released its quarterly earnings report on May 8. The company showed a rattling performance in terms of earnings-per-share increases and revenue which were the result of increased brand awareness and increasing marketing activities such as a Super Bowl ad campaign.

Total revenue increased 33.9% to $117.6 million, up from $87.9 million in the first quarter 2012. Western Europe contributed the largest share of the revenue increase with revenue increasing by 45% despite the concerns of recession; this was followed by America at 41%. The US is the blood-line of the company, where household penetration and consumer usage continued as evidenced by an 89% increase in revenue in America only. The company expects further growth as it approaches the summer season.

The company is also growing in mature markets such as Germany as well as in new markets like France. Sodastream International Ltd (NASDAQ:SODA) plans go bullish about the long-term opportunities in Italy as it’s in active discussions to resolve the distribution problem that is prevalent there. The only region in which it saw a decrease in revenue was Asia-Pacific. Strong gains in Australia and Korea were offset by problems in Japan where the company faced distribution permit problems. The company still expects full-year 2013 revenue to rise 27% over its 2012 revenue of $436.3 million.

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