SodaStream Delivers Flavorful Q2 Beat, Earns An Upgrade

Shares of Sodastream International Ltd (NASDAQ: SODA) gained more than 10 percent Thursday and hit a new 52-week high of $59.88 in reaction to the company's second-quarter report. The stock is now higher by more than 100 percent over the past year, but analysts at Susquehanna Financial Group see plenty of upside ahead.

Susquehanna's Pablo Zuanic upgraded Sodastream's stock from Neutral to Positive with a price target raised from $58 to $79 due to a better understanding of:

• The company's business model that could generate high-teens EBIT margins;
• Growth plans both in the U.S. and abroad;
• A superior valuation of the company's business amid no direct peers.

Meanwhile, there were several read-outs from the earnings report that confirm the Israel-based company is enjoying strong momentum, Zuanic added. For instance, refills of the Co2 gas canisters rose 5 percent in the quarter after showing no growth in the prior quarter and a strategy to focus on being a sparkling water maker is also "seen in the numbers" as total Co2 refills rose 10 percent to 8.3 million but flavor units fell 11 percent to 5.3 million.

Looking forward to fiscal 2019, the analyst estimates the company can earn $3.76 per share, up from a prior estimate of $3.00. The company will also at the time boast $256 million in net cash (or $11 per share) which implies compelling value in the stock ahead.

"For a company growing EBIT 30% this year, an on-trend concept, and no direct competitors (i.e., we see strategic value in SODA), we think the valuation is compelling," the analyst concluded.

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