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SodaStream ‘Right for America’ as Stock Sinks: Israel Overnight

SodaStream International Ltd. (SODA) Chief Executive Officer Daniel Birnbaum said his company will benefit from slowing U.S. economic growth and advised investors not to expect changes in profit guidance even as the stock sank 34 percent.

The Israeli producer of homemade soda machines posted a record decline in New York yesterday after the company that trades at four times average valuations on the Nasdaq Stock Market disappointed investors by not raising its 2011 earnings outlook. Shares rose 5.9 percent to $48.24 today after losing 34 percent yesterday, marking the worst performance among 2,605 stocks in the Nasdaq index.

SodaStream, whose single product can turn tap water into over 100 flavors of soda in refillable bottles, will benefit from a U.S. slowdown as consumers seek to save more, Birnbaum said in an interview yesterday. American households are becoming increasingly concerned about the economy after consumer confidence dropped last week to the lowest level since mid-May, the Bloomberg Consumer Comfort Index showed yesterday.

“SodaStream is right for America, we’re going to build this business one household at a time,” Birnbaum said from the company’s headquarters in Airport City, Israel. “We’re going to focus on that and not on the stock performance. The stock performance will follow the growth of the business.”

Prior to yesterday, the company was up 185 percent since its Nov. 2 initial public offering, the biggest gainer among companies that listed shares in the past year in the U.S. SodaStream trades at 66 times reported profit compared with the 16 average for companies traded on Nasdaq.

Leading Decliner

SodaStream led declines in the Bloomberg Israel-US 25 Index of the biggest Israeli companies traded in the U.S. The measure climbed 1.3 percent to 85.29 and is down 18 percent this year. Israel’s benchmark TA-25 Index advanced 0.8 percent to 1,068.63 yesterday and has lost 19 percent this year, or 20 percent in dollar terms.

The company tumbled at a time when almost $3 trillion has been erased from U.S. equity values in the last three weeks as Europe’s debt concern, signs the economy is slowing and Standard & Poor’s downgrade of America’s AAA credit rating left the benchmark gauge for U.S. shares within 30 points of a bear market.

Second-quarter revenue rose 38 percent to 53.3 million euros ($75.9 million), SodaStream said in a statement distributed by PRNewswire yesterday. Second-quarter sales were above the 50.2 million euros median estimate of six analysts surveyed by Bloomberg.

“We would use Thursday’s sell-off as a buying opportunity,” Joseph Altobello, an analyst at Oppenheimer & Co. in New York, wrote in an e-mailed report today. SodaStream isn’t “a broken story. In fact, far from it,” he said.

‘Disappointing’

The company said 2011 net income will probably climb 60 percent from last year, reiterating its previous outlook. Analysts had expected profits to almost triple, according to the median estimate of six analysts surveyed by Bloomberg.

“They put out good numbers but they didn’t really raise their guidance and that was quite disappointing,” said Scott Billeadeau, who helps oversee $17 billion at Fifth Third Asset Management in Minneapolis and sold his holdings in SodaStream. “With this valuation that’s just not going to cut it.”

Birnbaum, a former marketer at Nike Inc., Procter & Gamble Co., and Pillsbury Co., who was hired in January 2007, said SodaStream won’t revise its annual profit outlook every quarter to meet analysts’ expectations,

“This is no quarter for us to apologize for the results,” he said.

Opportunity

SodaStream appliances are available in about 7,000 retail stores in the U.S., including Best Buy and Bed Bath & Beyond, up from over 4,000 in early March and 1,300 at the beginning of 2010, according to an e-mailed report from Oppenheimer & Co. on July 27. They sell at between $80 and $200 at Cincinnati, Ohio- based Macy’s Inc., according to the retailer’s website.

“The market turbulence represents an opportunity for SodaStream,” Birnbaum said. “SodaStream leaves more discretionary dollars in their pocket. Household penetration will accelerate in the U.S.”

SodaStream’s options volume jumped to 12 times the four- week average as investors bought contracts for protection and sold existing hedges that paid off as prices for at least 30 contracts doubled in price. The October $25 puts jumped 500 percent to 90 cents for the largest increase among all contracts.

The company’s ratio of outstanding puts to sell versus calls to buy rose to a record 1.27-to-1 a month ago as traders increased bets on a retreat. As of July 17, open interest for the August $70 puts had risen to 2,401 contracts from zero before July 5, increasing more than every other option on the stock. Those options jumped 289 percent to $27.99 yesterday.

Tech Fundraising

Israel, whose population of 7.7 million is similar to Switzerland’s, has 57 companies traded on the Nasdaq, the most of any country outside the U.S. after China. It is also home to the largest number of startup companies per capita in the world.

Israeli technology companies raised $569 million in capital during the second quarter of 2011, the most in two years and up from $343 million in the same period last year, according to the Israel Venture Capital-KPMG Quarterly Survey released July 13.

Israel’s stock market was upgraded to developed market status by MSCI Inc. in May 2010, the same month the 63-year-old country was accepted to the Organization for Economic Cooperation and Development.

The shekel strengthened 0.5 percent to 3.5339 per U.S. dollar at 11:47 a.m. in New York. The currency has increased 4.1 percent versus the dollar over the past six months, the fourth- best performer among 10 emerging markets in Europe, Middle East and Africa tracked by Bloomberg.

Ituran Gains

Ituran Location and Control Ltd. (ITRN), the Azur, Israel-based maker of systems used to locate stolen vehicles, gained 2.5 percent to $12.68 yesterday. The shares in Tel Aviv added 0.6 percent to 43.84 shekels, or the equivalent of $12.39.

Second-quarter net income climbed 38 percent to $6.6 million, according to a statement distributed by PRNewswire yesterday.

To contact the reporter on this story: Tal Barak Harif in New York at tbarak@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net

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