SodaStream Shares Pop Higher Following Whitney Tilson Comments
As a guest contributor to Seeking Alpha, Whitney Tilson of Kase Capital wrote on Wednesday that he bought more shares of SodaStream International Ltd (NASDAQ: SODA). The hedge fund manager stated that he thought shares were "cheap" at $40, but are now "really cheap" around $20.
Shares of SodaStream popped higher following publication of the article, recently up 2.75 percent on the day.
Tilson, whose comments were originally published on October 21, said his belief is that SodaStream products are not a fad and offers customers a compelling cost and convenience advantage. Tilson also emphasized the products are environmentally friendly, as well as healthy, with two-thirds less sugar and calories than traditional soft drink beverages.
Tilson wrote that a study he conducted of 393 SodaStream users in the U.S. concluded that "people love their SodaStreams" as 55 percent of respondents are "hardcore users" while 18 percent enjoy a SodaStream beverage at least weekly.
"SodaStream's woes in the U.S. aren't due to it being a fad, but rather poor execution, especially in the areas of distribution, inventory management and marketing," Tilson wrote. "These are difficult but fixable problems – though it's hard to know how long it will take (it's already taken longer than I expected.)"
Tilson stated his belief in the company's Western European business alone is worth more than the entire current market cap. In fact, the company's CO2 refill business alone is also worth more than the entire current market cap. At time of publication, SodaStream's market cap was $437.7 million.
Bottom line, Tilson states that SodaStream is primarily a non-U.S. business and that many shareholders who are U.S. based project the problems they see domestically to the entire business.
Tilson has a $40 price target, equal to 20x run-rate earnings for Western Europe or 6.2x the after-tax gross profit of the refill business.
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