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Can SodaStream Keep Going After Last Week's 12% Pop?

It's not just fresh fizz bubbling at SodaStream (NASDAQ: SODA) these days. The stock is rewarding investors with its highest levels in nearly four years. Shares of SodaStream moved 12.4% higher last week, climbing after Susquehanna analyst Pablo Zuanic pushed his price target up from $79 to $90.

Investors in the company behind the namesake sparkling beverage maker have been scoring carbonated gains. SodaStream soared 142% last year, and is trouncing the market this year with a 68% pop. The stock has more than quadrupled since the start of last year. 

Image source: SodaStream.

Soda jerk

Susquehanna's Zuanic is naturally sticking to his positive stock rating. He feels that SodaStream is adding a million households a year to its platform after meeting with the company, and that the figure could prove conservative given its revitalized push in the beverage-happy U.S. market and plans for much deeper penetration in Germany. Throw in welcome trends including lower customer acquisition costs, improving starter system markups, and new plant efficiencies -- all pointing to improving profitability -- and Zuanic feels that the stock that has already soared 307% since the start of the last year should be a continued winner in the near term. Zuniac's new price target suggests another 35% of upside from current levels. 

SodaStream seemed left for dead two years ago when soft-drink consumption trends were going the wrong way. We're still swearing off sugary sodas, but SodaStream's popularity has been reignited as it positions itself as a maker of flavored sparkling water. SodaStream is coming off its sixth consecutive quarter of beating Wall Street's profit targets by a double-digit percentage margin. Revenue climbed nearly 10% in the second quarter, fueled by double-digit growth in starter kits and carbonator refills. Profits grew even faster, skyrocketing 84% for the period. 

The next big test will come a month from now when SodaStream reports its third-quarter results. Analysts see low double-digit percentage growth on both ends of the income statement. 

SodaStream has been one of the market's hottest stocks over the past two years, but this doesn't mean that it's trading at some sky-high valuation. The stock is trading at less than 22 times what analysts see it earning next year, and we've seen profit projections climb higher with every passing report. If we go back to the start of last year one can argue that the stock could've been had for a little more than five times 2018 earnings, but Wall Street pros were holding out for a lot less at the time. 

Nothing is guaranteed in this amazing turnaround story. SodaStream has been on the wrong end of a turning trend before, so who knows if the appeal for making sparkling water at home will evaporate if millennials stop chugging LaCroix and other sparkling water brand products. For now, it's hard to bet against SodaStream.

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Rick Munarriz has no position in any of the stocks mentioned. The Motley Fool owns shares of SodaStream. The Motley Fool has a disclosure policy.