Sodastream International Ltd. (Nasdaq: SODA) has left investors feeling flat in 2014, shares pulling back over 13% this year. SODA bulls can take heart as shares are off their February low of $35.34. The stock has traded in a 52-week range of $35.27-$77.80, having put in the high in July of last year.
Sodastream is scheduled to report earnings before market open on Wednesday. Analysts are calling for $0.01 EPS on overall revenue of $117.96 million. This is troubling; as this is indicative of significant year-over-year contraction (SODA had EPS of $0.57 one year prior). The abnormally harsh winter blamed by many retailers for poor North American sales was felt by Sodastream – Wal-Mart (WMT), Target (TGT), Costco (COST) all sell Sodastream products. This is critical, as North America accounts for 31% of all Sodastream sales. The company also shifted its focus from retail expansion to the launch of a new product, it’s ‘Play’ soda maker. Nonetheless, strong growth is expected in international markets including Australia, Japan, and European markets.
BIG MOVES
Historically, the stock has moved 7.8% on earnings over the past 8 quarters. The stock has sold off 2 of the past quarters, and rallied four of the past eight (data courtesy of Trade Alert). The SODA May at-the-money straddle is implying a move of 8.0%.
OPTIONS PLAY
I’m generally bullish on SODA in the medium-term, and expect to hear some positive news on the earnings call. In these cases, I like to look at buy an out-of-the-money Call spread for around $0.25. To best capture the earnings catalyst, this should be done in the last half hour of the session, as Sodastream will report pre-market on Wednesday.
