Will SodaStream Go Private?

SodaStream (SODA) share prices have dropped 30% in 2014, while the S&P500 Index is up 7%. According to unnamed sources, SodaStream plans to divest for $40 per share.

Reports have emerged that SodaStream International will soon be going private!

SodaStream International (SODA) has sparked plenty of interest on the back of reports that it plans to divest its shares at a price of $40 each to a private buyer.
This Israeli company is purportedly in consultations with an investment company to privatize and reports suggest that the company is valued at $828 million. However, investors appear to doubt the credibility of such reports. At $40, SodaStream (SODA) would be trading well below its 2013 price. Poor quarterly results dragged the share price lower, on the back of weak domestic demand in the US. The short-term spike in the share price following news that the company was expected to divest to a private buyer is nothing new.

Back in April 2014, SodaStream (SODA) International was reportedly seeking a buyer for an estimated 16% stake in the company. Speculation was rife that a major company like the Dr Pepper Snapple Group Inc (DPS), PepsiCo (PEP), or even Starbucks Corporation (SBUX) would snap up a chunk of the company. When the Coca-Cola Company bought a stake in Keurig Green Mountain many industry analysts expected SodaStream to partner with Coca-Cola's major competitors.  During Q1 2014, SodaStream's earnings declined in the US as high inventory levels persisted on the back of weak holiday demand from the latter part of 2013.

Finding Favor with US Consumers

The challenge for SodaStream in the US is to bring its brand into favor with US customers. In the US, Soda machine sales dropped by 55% while they rose as much as 4% in other parts of the world. The strongest growth markets include Finland and Germany where an estimated household penetration of 20% exists. SodaStream (SODA) has attempted to cut the price of its products at mass retailers like Walmart, to limited effect. As American consumers move away from carbonated drinks and sugar-loaded drinks to more health-conscious alternatives, SodaStream has been attempting to re-invent itself to meet these challenges. The new move is towards health and wellness and SodaStream is pinning its hopes on breaking through to consumers.

Valuation of SodaStream (SODA) Shares

Investors expect generally flat figures from SodaStream (SODA) stocks through the rest of the year. The ongoing conflict with Gaza has had a limited effect on the company, but production levels remain steady in Israel. In terms of performance for the rest of the year, management of SodaStream is forecasting revenue growth of 5% and a net income decline of 5%. Prior expectations pegged revenue growth at 15% and net income at 3%. Owing to these figures, the inexpensive price of the shares is misleading. The P/E ratio of SodaStream (SODA) is 25, which exceeds the overall S&P 500 Index's price earnings ratio of 19.72. Some investors believe there is potential for SodaStream in the US, since other market players are already making inroads.  SodaStream (SODA) is currently trading at $33.61 and has a market cap of $704.40 million. The 52 week trading range is $28.65 - $69.78. The stock enjoyed rapid growth in 2011 before sliding almost 50% and remaining flat during 2012.  SodaStream regained its shine in 2013, but inevitably lost favor with investors as it retreated from its $70+ high for the year. The stock has lost approximately 30% of its value in 2014 as the declining trend continues.
By Chrisine Deniyal
Blogger, Publisher, and Writer for Banc De Binary

Copyrighted 2020. Content published with author's permission.

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