Buy the Dip On This Beverage Stock

Sodastream International shares could be headed to new highs

May 11, 2017 at 10:22 AM
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The shares of Sodastream International Ltd (NASDAQ:SODA) took a hit on Tuesday, despite the beverage maker reporting stronger-than-expected per-share earnings. However, SODA stock's pullback could present a buying opportunity for eagle-eyed bulls, according to data from Schaeffer's Senior Quantitative Analyst Rocky White.

Specifically, SODA came within one standard deviation of its 40-day moving average, which has marked "buy" signals in the recent past. According to White, after Sodastream stock's last five tests of this trendline, the shares were positive 80% of the time one month later, with an outstanding average return of 9.26%. If past is prologue, that means SODA could be flirting with $57.75 one month from now -- in territory not charted since late 2013. SODA stock has already nearly tripled over the past year, and sports a year-to-date gain of 34%, despite yesterday's earnings drop. 

soda chart may 11_2

There's plenty of sideline cash to power SODA to higher highs, too. Short interest surged nearly 30% during the past two reporting periods, and now accounts for almost four days' worth of pent-up buying demand, at the equity's average pace of trading. Upgrades or positive analyst initiations could also lure more buyers to the table, with only three brokerage firms following SODA, and all maintaining a tepid "hold" recommendation.

A mass exodus of option bears could also bode well for Sodastream International. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day put/call volume ratio of 0.90 is higher than 86% of all others from the past year. In other words, SODA options traders picked up bearish bets over bullish at a faster-than-usual clip during the past two weeks.

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