SodaStream Surge Extending to JPMorgan on U.S.: Israel Overnight

SodaStream International Ltd., the Israeli maker of soda machines trading at the most expensive level since February, will extend last year’s 37 percent climb as its U.S. business grows, according to JPMorgan Chase & Co.

Shares of the company, based in Airport City, Israel, climbed 12 percent last week in New York to $48.69, the highest level since Aug. 15, 2011. It was the biggest gainer on the Bloomberg Israel-US Equity Index of the largest U.S.-traded Israeli companies, which rallied 1.6 percent in its first weekly advance since November. Mellanox Technologies Ltd. rose 3.2 percent Jan. 4, trimming its slide in the week to 13 percent.

SodaStream, which sells its machines, gas canisters and flavors in Wal-Mart Stores Inc., trades at 18.3 times estimated earnings, the highest level since Feb. 29. The U.S. will contribute 39 percent of SodaStream’s sales this year, according to JPMorgan, from 29 percent in 2011. The company will post a 44 percent jump in adjusted net income in the first quarter, the median of analysts’ estimates shows.

“As the top line continues to grow, and more U.S. revenue switches to canisters and flavors, the profitability in the U.S. business will improve,” John Faucher, an analyst at JPMorgan who rates SodaStream a buy, said by phone in New York Jan. 4. “That’s a trend that benefits SodaStream.”

The Bloomberg Israel-US Equity Index ended last week at 86.78. Israel’s TA-25 Index rose 0.7 percent to 1,218.84 at 10:57 a.m. in Tel Aviv.

Rising Income

SodaStream, which is counting on a commercial during next month’s Super Bowl to boost U.S. sales, will post net income in the first quarter of $14.6 million, according to the average of four analysts’ estimates compiled by Bloomberg. Sales in the first quarter will rise 23 percent, according to the average of five forecasts.

The stock is trading at its widest premium versus the average valuation for companies on the Nasdaq Composite Index since at least February, data compiled by Bloomberg show.

SodaStream began to roll out its products in May at 2,900 stores owned by Wal-Mart, the world’s largest retailer, while its machines have also been available since at least the second quarter at Target Corp., Staples Inc. and Bed Bath & Beyond Inc., as well as department stores owned by J.C. Penney Co. and Macy’s Inc.

As the shares have soared, bets on its decline have decreased.

SodaStream’s 9.6 percent rally in the second half of 2012 came as short interest on the stock declined to 8.1 million shares, or 45 percent of the company’s float, at the end of December from 10.8 million shares in May, data compiled by Bloomberg show.

Fad Concerns

Investors have been shorting SodaStream on concern the product, which carbonates tap water, is a fad and that revenue growth will slow as copycat machines and products encroach on market share, Faucher said.

Mellanox plunged last week in the U.S. to $52.31, after the Yokneam Elit, Israel-based developer of data management technology cut its fourth-quarter sales forecast to between $119 million and $121 million, compared with revenue guidance given in October of $145 million to $150 million.

Shares of the company rose Jan. 4 after Chief Executive Officer Eyal Waldman said in an interview after markets closed the day before that he expects $150 million in quarterly sales to again become the “base line sometime in 2013.”

Mellanox’s revenue in the third quarter reached a record $156.5 million. The shares in Tel Aviv rose 3.7 percent to 197.4, or the equivalent of $52.32, this morning.

Allot Communications Ltd., which develops products to track wireless traffic, tumbled 16 percent last week to $14.63 in New York after Oppenheimer & Co. said fourth-quarter sales will miss analysts’ estimates. Shares of Hod Hasharon, Israel-based Allot traded in Tel Aviv lost 8.7 percent this morning to 55.69 shekels, or the equivalent of $14.76, heading for the lowest close since November 2011.

Ittai Kidron, a New York-based analyst at Oppenheimer, wrote in a Jan. 3 report that Allot will report fourth-quarter sales of $28.6 million and net income of $5 million, missing the mean for revenue of $31.09 million and profit of $5.5 million of 11 analysts’ estimates collated by Bloomberg.

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