Distribution Expansion Makes SodaStream (SODA) a Must Buy Stock - Deutsche Bank
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Price: $143.68 --0%
Rating Summary:
3 Buy, 13 Hold, 0 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 12 | Down: 23 | New: 22
Rating Summary:
3 Buy, 13 Hold, 0 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 12 | Down: 23 | New: 22
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Deutsche Bank reiterated its Buy rating and $40 price target on SodaStream International (NASDAQ: SODA) following recent results.
The firm said while there are some holes in the story, the company is in the early stages of a distribution expansion story with considerable room for: (i) further store expansion; (ii) increased household penetration off low levels; and (iii) margin expansion via fixed cost leverage and better profits per media dollar spent.
The holes in the story are: (i) Sequential growth in canister exchange and flavors unit volume was weak; (ii) Gross margin was down more than expected (which we believe is mostly due to soda maker mix shift); (iii) Productivity per door has been coming down (but ticked up this quarter); (iv) Days receivable is trending upward, a potential sign that sell-in is exceeding sell-through; and; (v) 4Q12 net income guidance, despite solid distribution driven top-line growth off a high base, is expected to come in flat, driven by significant strategic spending to support further US distribution rollout.
While holes exist, the firm said their thesis is based on higher US household penetration driven by much higher than expected distribution expansion. This remains "well ahead of schedule", with 1,100 Target and Staples doors for the holidays clear upside to the model that we didn't have flowing through until next year.
The biggest concern, and one that is tough to answer at this stage, is trial and
repeat rates in the US and other new markets. However, with valuation at current levels and with strong door growth there is time to get those questions answered.
The company is significantly expanding retail presence in Q4 with entry into
1,100 Staples, 1,100 Targets and an incremental ~270 Best Buy stores, in addition to a holiday in-and-out at 240 Costco's. The company's product will be in 9500 stores in Q4, which is up 44 percent from the Q3 stores.
The firm also notes there is potential for additional expansion into Wal-Mart, Kroger, Safeway, CVS, and Walgreen.
Shares are trading at a compelling valuation of approx. 17x CY12 EPS estimates of $2.00, the firm notes.
For an analyst ratings summary and ratings history on SodaStream International click here. For more ratings news on SodaStream International click here.
Shares of SodaStream International closed at $32.90 yesterday.
The firm said while there are some holes in the story, the company is in the early stages of a distribution expansion story with considerable room for: (i) further store expansion; (ii) increased household penetration off low levels; and (iii) margin expansion via fixed cost leverage and better profits per media dollar spent.
The holes in the story are: (i) Sequential growth in canister exchange and flavors unit volume was weak; (ii) Gross margin was down more than expected (which we believe is mostly due to soda maker mix shift); (iii) Productivity per door has been coming down (but ticked up this quarter); (iv) Days receivable is trending upward, a potential sign that sell-in is exceeding sell-through; and; (v) 4Q12 net income guidance, despite solid distribution driven top-line growth off a high base, is expected to come in flat, driven by significant strategic spending to support further US distribution rollout.
While holes exist, the firm said their thesis is based on higher US household penetration driven by much higher than expected distribution expansion. This remains "well ahead of schedule", with 1,100 Target and Staples doors for the holidays clear upside to the model that we didn't have flowing through until next year.
The biggest concern, and one that is tough to answer at this stage, is trial and
repeat rates in the US and other new markets. However, with valuation at current levels and with strong door growth there is time to get those questions answered.
The company is significantly expanding retail presence in Q4 with entry into
1,100 Staples, 1,100 Targets and an incremental ~270 Best Buy stores, in addition to a holiday in-and-out at 240 Costco's. The company's product will be in 9500 stores in Q4, which is up 44 percent from the Q3 stores.
The firm also notes there is potential for additional expansion into Wal-Mart, Kroger, Safeway, CVS, and Walgreen.
Shares are trading at a compelling valuation of approx. 17x CY12 EPS estimates of $2.00, the firm notes.
For an analyst ratings summary and ratings history on SodaStream International click here. For more ratings news on SodaStream International click here.
Shares of SodaStream International closed at $32.90 yesterday.
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