SodaStream (NASDAQ:SODA) shares have been rallying lately, and at least one analyst thinks that the fizz is just getting started.
Citi analyst Wendy Nicholson initiated coverage of the company behind the popular system that turns flat water into sparkling soda with a buy rating and a $60 price target.
Nicholson is excited about some of the stateside developments that shaped 2012 for SodaStream. The world's largest retailer as well as the country's most prolific warehouse club began stocking SodaStream last year. SodaStream has also struck licensing deals that introduced Kraft Foods' (UNKNOWN:KRFT.DL) Country Time, Crystal Light, and Kool-Aid flavors last year, with Campbell Soup's (NYSE:CPB) V8 Splash and V8 V-Fusion flavors set to hit the market later this year. It's a win-win for the food giants, which get to expand their brands in a new category, providing validation to the SodaStream platform along the way.
These are developments in this country, which until now make up a surprisingly small part of the Israeli-based company's overall sales. The Americas accounted for just 34% of SodaStream's revenue in its latest quarter. Western Europe is still the pop star's biggest market, though that's been changing over the years as SodaStream breaks into new territories with surprising success.
Nicholson does see growth slowing in the coming years. She's modeling top-line growth of just 20% this year, in line with the Wall Street consensus.
Her model calls for revenue growth of 20% in 2013, from 36% in 2012. On the earnings front, Nicholson is targeting a profit of $2.69 a share this year and $3.05 a share come 2014. Her $60 price target would value the company at less than 20 times next year's projected profitability.
Things could get even better, though. Nicholson feels that margins will expand as higher-margin consumables -- the carbonating cylinders and bottles of soda syrup -- become a bigger part of SodaStream's business. That's already starting to happen, as consumables revenue has soared 54% through the first nine months of 2012. Revenue from the actual lower-margin starter systems has climbed just 41% higher in that time.
Educating the market has been a top priority for SodaStream, and that will get easier when it rolls out its first Super Bowl ad next month.
Good things are pouring at SodaStream.
Longtime Fool contributor Rick Aristotle Munarriz owns shares of SodaStream. The Motley Fool recommends SodaStream. The Motley Fool owns shares of SodaStream. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.