(By Rich Bieglmeier) Last week was a quiet week for accumulation. As always, small-cap biotechs dominated the top of our percent of market cap leaderboard, but nothing that jumped off the screen like a 3D movie effect. It's not too surprising considering Wall Street's obsession with the fiscal cliff; half of the bus is over the edge and the driver is passed out.
But, that doesn't mean investors completely give up on trying to acquire winners and unload losers – right? iStock defaults to the biggest name early on our accumulation list when the spear's edge doesn't pop out.
This week, the honor belongs to SodaStream International Ltd. (SODA). Last week, Wall Street streamed $8.1 million – or nearly 1% of the company's market-cap into SODA buy tickets. SodaStream is an Israeli company that makes home beverage carbonation systems that enable consumers to transform ordinary tap water instantly into carbonated soft drinks and sparkling water. It's the soft drink bootlegger's answer to Coke!
SODA appears to be a popular Christmas gift. According to Google Trends, the company reaches max search queries this time of the year and 2012 is stacking up nicely relative to 2011. In the four weeks prior to Christmas, Google search intensity is up 35% this year for SODA. Alexa.com reports that web traffic is up 110% in the last month and their traffic graph show roughly a 200% increase over last December.
More people searching, more people on the website should translate into more sales. In 2011, the drink machine maker earned 32 cents for the December quarter. This year, analysts expect SODA to earn 37 cents, which is down sharply from Wall Street's opening bid of 49 cents, 90 days ago. Based on what iStock sees with SODA's web traffic and search volume, iStock anticipates eps closer to 43 cents. We'll see in late February early March.
According to iStock's technical take on SODA, shares are near a bar of support from $42 through $41ish. Breach $41, and there is a good chance investors could see the stock trade down to its 50-day moving average in $38's neighborhood. As for upside, the price recently pierced multiple tops turned support in the $41-$42 zone we wrote about a couple of sentences ago. SODA appeared ready to take on its 52-week high of $48.13 before plan "B"oehner failed.
At the end of 2011 and early 2012, shareholders were rewarded with a sharp rally as the stock covered ground from $30ish to $47.50ish in two months. Going back to August 2011, the stock has spent almost all of its time between $30 and $45. It's a wide range but looks like a base to us. If SODA bubbles-up past $48, the stock could flow; the longer the base the bigger the breakout. Eighteen months ago, SODA flirted with $80.
If web traffic, Google Trends, and SODA's 2011 post Christmas pattern lead investors in the wrong direction, another trip to $30 could be in store.
We think the stock is reasonably priced using some of our favorite metrics. The forward P/E stands at 16.26 while analysts believe profits will increase by 24.30%. The discount is illustrated nicely by SODA's PEG ratio of 0.69, anything under 1 is considered solid. Warren Buffet and the Investors' Business Daily would smile at the company return-on-equity (ROE) of 17.65%. And, if the stock ever heats up, it could catch fire as 60% of SodaStream's float (stock available for trading) is sold short. A little short squeeze and this baby could foam up, right out of the cup.