SodaStream Earnings Sizzles but Stock Price Fizzles

SodaStream International Ltd,

SODA

the home carbonation system manufacturer and marketer, posted second-quarter profit far above analysts expectations. The Israel based company reported on its Website

that net income rose 43.9 percent to $9.5 million or 45 cents a share up from $6.6 million or 32 cents per share a year earlier. Total revenue increased 49.1 percent to $103 million compared to $69.1 million in the second quarter of 2011. In the company's press release CEO Daniel Birnbaum said, “"We are very pleased to have generated our first $100 million revenue quarter ever." Gross margins grew 54.4 percent versus 53 percent for the second quarter last year, however marketing expensive rose by 36 percent to $37.1 million versus $22.5 million or 32.5 percent for the prior year's second quarter. SodaStream raised its 2012 guidance for sales growth to 40 percent from earlier estimate of 33 percent over last year. The company increased its net income forecast from 50 percent to 55 percent above 2011. Birnbaum believes, “The successful execution of our growth strategy, combined with a strong pipeline of product innovation, gives us confidence in our ability to capture a greater share of the global beverage industry in the years ahead." Revenue growth can be seen from all regions with the America's more than doubling to $30.7. Europe was up 25 percent to $54 million, while Asia and the Pacific Rim sales revenue tripled to $9.9 million. No doubt SodaStream is a growth story but Wall Street traders are not fully convinced. Last July share prices were trading north of $70 and now are trading at $40. Yahoo Finance <href=http://finance.yahoo.com/q/ks?s=SODA+Key+Statistics> indicates that 67 percent of the stock's float is short. A perfect illustration of just how volatile shares are with such a bearish short open interest, this morning shares were up eight percent in pre-market trading and within the first hour of the NASDAQ opening SodaStream had traded down 3% The majority of SodaStream's competitors trade on OTC or pink sheet system indicating that these companies do not meet minimum requirements and do not have to file with SEC. All these shares have a small share float, high betas and market capitalizations of well under a $1 billion. There is absolutely no reason to trade anything on the pink sheet list. The Wall Street adage applies for SodaStream, buy the rumor sell the news. Based on earnings, revenues, full year guidance, than compounded with beating analysts' expectation and the heavy short float, this stock should have exploded. The short traders should have been squeezed hard and they were not. There is something is amiss here and for now leave this on one's radar but not in one's portfolio.

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