Sodastream International Ltd (SODA): Investment or Fad?

PepsiCo, Inc. (NYSE:PEP), on the other hand, has been rumored to be developing their own Sodastream that would control the consistency of their products for at-home use.  Whether or not the rumor is true, Pepsi must acknowledge the competition that Sodastream has brought into their marketplace.  A successful launch of a Pepsi-licensed beverage system would obviously be a major challenge to Sodastream.  But would a Pepsi Soda Maker help overall, or just cannibalize Pepsi’s current grocery sales?

Improvements can be made to Sodastream’s operations.  In the last earnings release, CEO Daniel Birnbaum outlined a few areas of opportunity that could create incremental income in the quarters to come. Sodastream has struggled with their distribution as recently as October 2012, when costly air freight shipments over $1 million in expense, in order to have product on shelves in time for Christmas.  Additionally, a roll out to the Mexico marketplace was “not effective” in the words of Birnbaum.  Instead of relying on a third-party distributor in Mexico, the company will dedicate long-term resources to building out this strategic geography.  As management becomes more adept and seasoned to the challenges of a growing company, they will streamline operations and improve profitability.

With over 55% of the float held short, Sodastream is a true battleground stock.  2013 looks to be the year that Sodastream will go big or go home.  Inventory was rumored to be low at the end of Q4, signaling strong holiday sales.  With strong product placement in early 2013 in Wal-Mart, units could see increase demand.  If Q4 2012 results and Q1 2013 guidance beat analyst expectations, shorts will scramble to cover, and Sodastream shares will soar to new highs.

The article Sodastream: Investment or Fad? originally appeared on Fool.com and is written by Spencer Houlihan.

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