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Is SodaStream a Risky Buy?

By Jim Mueller, CFA and Blake Bos - Dec 24, 2012 at 3:00PM

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The disruptive make-your-own-soda company has been showing investors gangbusters growth. But is it just a fad?

In this video, Motley Fool analyst Jim Mueller talks about the risks associated with SodaStream (NASDAQ:SODA). As a high-growth company, SodaStream attracts competition, which is one of the risks. It's not had much in the way of competition as it provides customers with everything for making sodas. However, there are some alternatives available in the market, and competition is coming. Also, soft-drink giants Coca Cola and Pepsi can either release their own soda makers or buy out SodaStream.

Jim also focuses on inventory risk. As inventory levels have been high compared to sales in the past, investors should be watching these. Convenience and location are other factors. As certain parts of the soda maker need to be replaced once used up, consumers should be able to buy these at convenient locations, which is why SodaStream needs to start supplying more retail stores including Walmart and Best Buy.

Lastly, Jim focuses on the popularity of SodaStream and whether or not it can become a fad. Consumers might switch to the new, healthier, and more eco-friendly way of getting soda, but might end up switching back to their old habits of getting their soda in cans and bottles.

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Stocks Mentioned

SodaStream International Ltd. Stock Quote
SodaStream International Ltd.
The Coca-Cola Company Stock Quote
The Coca-Cola Company
$62.83 (-0.33%) $0.21
Wal-Mart Stores, Inc. Stock Quote
Wal-Mart Stores, Inc.
$123.84 (0.10%) $0.12
Target Corporation Stock Quote
Target Corporation
$149.63 (-0.53%) $0.79
Pepsico, Inc. Stock Quote
Pepsico, Inc.
$166.18 (0.03%) $0.05
Best Buy Co., Inc. Stock Quote
Best Buy Co., Inc.
$72.69 (-2.68%) $-2.00

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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