As US stock markets slip into bear market territory, Sodastream shares have moved higher by 2.3%.
Deutsche Bank has been bullish on the company’s prospects for a while. But only today did they upgrade the stock to ‘buy’ from ‘hold.’ However, it also lowered its price target to $40 from $50.
DB analyst Bill Schmitz Jr. said it’s because the company is in the “early stages of a distribution expansion story,” and because it has more attractive valuation now.
“With the stock off considerably over the last several weeks, we are stepping in as valuation has become attractive enough to get us comfortable that the downside case is limited here, even based on conservative US household penetration and usage assumptions.”
While DB did trim estimates after the company said growth may be decelerating, the channel checks were largely positive. Plus, the brand seems to be popular in Sweden where it has high household penetration.
Risks to the brand include a failure to convert Sodastream machine buyers into canister refill consumers.