Wall Street Analyst: SodaStream Has No Reason To Worry Over Keurig Cold

Within minutes of Green Mountain Coffee Roasters (NASDAQ: GMCR) announcing its ten year strategic agreement with Coca-Cola (NYSE: KO), shares of SodaStream (NASDAQ: SODA) sold off by more than ten percent.

SodaStream, with a valuation of less than one billion dollars, versus the $160 billion plus Coca-Cola for the home carbonation category. Investors should feel worried as this sounds like a nightmare scenario for the Israeli based SodaStream.

Not so fast, says one Wall Street analyst.

Anton Brenner of Roth Capital thinks that the collaboration between Coca-Cola and Green Mountain will benefit the entire category, including SodaStream.

“In our view, competition in this market will create a greater degree of consumer awareness and increase household penetration, to the benefit of both players,” said Brenner in a note to clients on Friday. “However, we view a SODA tie-in with PepsiCo as a long shot, and not necessary for the company to maintain rapid sales and earnings growth.”

SodaStream has a 55 percent short position that could serve as an indication that the market views SodaStream and the home carbonation market as a “fad.”

Brenner doesn't think that way.

“Never mind that major retailers and beverage companies including Kraft, Campbell Soup, Ocean Spray and Samsung have partners with SodaStream,” said Brenner. “Clearly home carbonation is not a fad but a rapidly growing category.”

Bottom line, according to Brenner, is that neither Coca-Cola nor Pepsi would want to attach their name with SodaStream as the customer is able to carbonate their beverage as much or as little as desired. Thus, each beverage can and will taste radically different, something that neither beverage manufacturer “would be anxious to attach its brand name to such a customizable product.”

SodaStream is just fine the way it is, according to Brenner and a little competition between two distinct versions of home carbonation in the market should appeal to customers.

Let the home carbonation battle begin.

Shares are currently Buy rated with a $55 price target.