Can Anything Stop SodaStream?

Soft-drink disruptor SodaStream (NASDAQ: SODA  ) is a company (and stock) that has big-time growth priced in, and backs it up with unyielding performance. In the company's recently ended quarter, sales were up nearly 30% and ahead of analyst expectations. Though technically a razor-razor blade business model, SodaStream is selling plenty of razors in addition to its consumable counterparts. Concerns that some had about the business centered around having a wide enough moat -- an issue that has hurt a similar company, Green Mountain Coffee Roasters (NASDAQ: GMCR  )  -- appear to have ebbed as the company makes more and more moves to cover its bases. Can anything stop SodaStream?

Strong tailwinds
SodaStream's product couldn't have come at a better time, or in a better place. The company's main market is the United States, a nation that consumes nearly 50 gallons of soda per person every year (though that number is contracting, if slowly). And even as we are desperately trying to get marginally healthier in our day-to-day activity, we just can't kick the cola. Luckily, SodaStream has a product that enables us to consume our requisite vats of soda while keeping the calorie count below that of the longtime gorillas in the space (Coke and Pepsi).

The company has lined up a list of Who's Who retailers to sell its products -- Wal-Mart, Kroger, even Office Depot -- all of whom have helped it achieve a more than 50% increase in operating income from the year-ago quarter and a current projection of $2.56 per share for the full-year 2013, nearly $0.50 higher than last year's number.

For a while, SodaStream concerned some analysts (including the author) because of the rise and fall of Green Mountain Coffee, the first major success in the make-your-own-instant beverage category. Green Mountain suffered from both macro and company-specific issues that brought the stock from more than $100 per share to less than $20 in a matter of months. It's since recovered well, but questions remain -- such as whether the expired patent will erode the company's growth efforts or if the company's addressable market is as large as it claims.

SodaStream is susceptible to both problems, but has yet to give any evidence that it's happening.

Bubbling up
SodaStream already has some patents that have expired, yet we aren't seeing the generic gold rush that Green Mountain Coffee experienced. Perhaps that's because SodaStream's moat is stronger than we think. For example, its CO2 canisters, which are swappable at outlets such as Bed Bath & Beyond, are a deterrent and formidable obstacle for competitors to address.

The company has also allowed the machine to be incorporated in potential market-eroding foes, instead making them into friends. Samsung recently introduced a new line of refrigerators with the ability to choose carbonated beverages or still water from the fridge door --the technology coming from SodaStream.

A point of hesitance overcome
SodaStream could be overstating its addressable market, similar to Green Mountain Coffee. Sure, the planet's soda consumption creates a $300 billion-per-year industry, but not all of these drinkers sit at home to drink their soda. It's more of an out and about, "I'm thirsty" kind of thing. Green Mountain Coffee believed it could tap into the coffeemaker market, but as David Einhorn pointed out, not all of those people sit at home drinking their coffee.

SodaStream's saving grace is its valuation, which is still pricey and likely off the radar of any value-oriented investor. But at less than 20 times projected 2014 earnings, it's not out of the ballpark. The company sees the majority of its growth here, with a few other markets helping out along the way, and that shouldn't change over the next couple of years.

For the time being, SodaStream appears to be in control of its future, and investors fearing a Green Mountain repeat should take a second look as this company appears to be of a different flavor.

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