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Old 11-12-2011, 08:56 PM   Nav to Top  #1
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Money SodaStream International the Perfect Short Squeeze

SodaStream International is a name that I have traded quite a bit since its IPO. For those of you that are not familiar with the name, the company sells home brewing soda system that produces carbonated beverages that are better tasting and better for you than traditional soda. After the initial outlay of buying the machine, it is long term more cost efficient for a household as well which will cause every mother to want one in their house once the news gets out!

I have dove back into its fundamentals since its most recent quarterly earnings announcement last Wednesday. The company doubled its net income for the third quarter from last year which beat analysts expectations allowing the stock price to jump. However from its highs Thursday morning at $38 a share, the stock price has fallen back down to $32 which is why I am writing this article on it. Shorts have dominated this company's stock price over the last couple months as it was trading in the $70's in August. The company had a bad third quarter earnings release where management said it would not manipulate the estimates each quarter scaring away all buyers and bringing in a ton of short sellers. Today, it is very hard to find any stock to short of this name with well over half of its float being shorted. This is setting up to be a mega short squeeze if you ask me.

SodaStream International Fundamentals

SodaStream International has better fundamentals than its price action makes it out to have in my opinion. SodaStream International said in its quarter earnings that it has seen better than expected growth in Europe. This is surprising given the turmoil in Europe and the fact that southern Europe is in recession. The growth in the United States has been even better for the company. SodaStream International sold 267,000 of its soda makers in the United States thanks to its distribution partnerships with Bed Bath Beyond, Staples, Costco and Target. Just in the past month SodaStream International has its products selling in over 3,000 more stores than it did the previous month in the United States. Target went from its 50 store trial to over 1100 stores. Same with Staples, and Costco now sells it in 250 stores. This just screams revenue growth! In the Americas alone, it had year over year sales growth of 117% while having unit growth of 155% which is remarkable. I only see these numbers increasing as more stores sell SodaStream International products in the current distribution channels; and I feel it will strike a deal with WalMart in 2012 which will really give it some accelerated revenue growth.

This company has a very small market cap of $600 million currently and that will cause it to be more volatile than your Apple and Microsoft stock, but I feel it has much more upside than either of those I just named. The company has no debt currently and nearly $100 million in cash on its balance sheet which is over 10% of its market cap. This name is just screaming buy to me right now even though the big money managers have been shorting the hell out of it. Eventually, news will come out and these shorts are going to need to cover making a huge short squeeze with a very small float of shares. This could cause a 100% increase in a week if SodaStream International announces that WalMart is going to sell the products in its stores. I want all my readers to be in the name before that happens.

SodaStream International Outlook

My outlook on this company is very good. I have mentioned in previous articles that I love the business model. It reminds me of the Green Mountain Coffee Roasters business model from the last 5 years when it was one of the highest returning stocks during that time. I feel SodaStream International could provide similar returns in the next 5 years. Currently, the company has a full year outlook of a 36% increase which was higher than its previous forecasts. I also feel it will increase this growth rate next year as it will expand in the US stores and hopefully in WalMart. SodaStream International also just announced a partnership with Grupo Cassab in Brazil which is like a Brazillian WalMart. This gives it penetration into one of the biggest emerging markets as well as growing in the developed nations. The company has a long way to go before it reaches saturation and I feel the next two years will provide accelerated revenue growth which as we have stated before is like crack to money managers. It will not be long before all the shorts cover and go long SodaStream International making its stock price rocket higher and I want all of you in before that happens!

Enjoy the weekend,

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