Is now a good time to get in with Celsius (CELH)? The short answer is maybe you should wait a bit. The beverage company has seen monumental growth recently. The company’s total revenue soared to nearly $1.5 billion, while the stock has surged 82% over the past three years. However, the stock has pulled back roughly 58% in the past three months on weaker demand for energy drinks in the market and increased doubt regarding the sustainability of Celsius’ growth. Yet, the company reported earnings results for its most recent quarter, which exceeded expectations.
With the stock showing negative price momentum while trading at a premium to industry peers, investors might want to hold off on this one and wait for a potentially better entry point.
Celsius’ Fighting U.S. Slowdown with Global Expansion
Celsius Holdings is a global beverage company known for CELSIUS, a sugar-free energy drink.
Despite recent slowdowns in beverage sales, experts remain optimistic about the energy drinks sector. The convenience channel contributes substantially to energy drinks sales, accounting for approximately two-thirds of the category sales. Even in the face of slower growth, the energy drinks category continues to be a vital growth segment within soft drinks in the U.S., with younger demographics fueling its growth.
The company has made notable strides in global expansion, with sales in the UK and Ireland kicking off in Q2 2024 through the fitness channel and select gyms, while Celsius continues to exceed sales expectations in Canada, where it introduced CELSIUS Sparkling Green Apple Cherry in Q2 2024. Furthermore, the company anticipates launching sales in Australia, France, and New Zealand in the second half of this year and expanding its reach in 2025.
Celsius’ Recent Financial Results
The company recently reported financial results for the second quarter of 2024. Revenue of $402 million surpassed analysts’ estimate of $392.74 million and showed an impressive 23% increase from the previous year. This was driven by robust retail sales growth in the U.S., which saw a year-over-year increase of 36.5%. Internationally, sales also performed strongly, with the Q2 figure reaching $19.6 million, up 30% from the previous year’s $15.1 million.
The company reported a record gross profit of $209.1 million, marking a 32% increase from the same period in 2023. Earnings per share (EPS) of $0.28 beat the consensus projection of $0.24 and marked a 65% increase from last year.
The company ended the quarter with approximately $903 million of cash on hand.
Management has offered guidance for the second half of the year, stating a key focus will be monitoring raw materials, including the cost of aluminum and fuel. Additionally, growth investment will be made through widening promotional incentives. A conservative approach will be maintained with a target gross margin in the high 40s to 50s range.
What Is the Price Target for CELH Stock?
The stock has been volatile over the past year, climbing over 70% through mid-May and shedding 56% since. It trades toward the bottom of its 52-week range of $36.17 – $99.62 and demonstrates ongoing negative price momentum, trading below its 20-day (43.50) and 50-day (52.22) moving averages. The P/E ratio of 39.64x reflects a premium to the Non-alcoholic Beverage industry average of 24.92x.
Analysts following the company have been constructive on the stock. For instance, Ladenburg analyst Jeffrey Cohen recently reiterated a Buy rating on the shares. However, he lowered the price target from $90 to $78, noting the company’s leadership position in the energy drink market. The price target change reflects the current market conditions.
Based on the recommendations and price targets recently issued by 15 analysts, Celsius Holdings is rated a Moderate Buy. The average price target for CELH stock is $64.00, representing a potential 59.32% upside from current levels.
Celsius Holdings in Review
Despite a pullback in the stock’s price and weaker demand for energy drinks, Celsius exceeded quarterly expectations and is poised for continued growth with its ongoing global expansion efforts. The stock trades at a premium compared to its peers, likely reflecting growth expectations. Yet, it continues to show negative price momentum. Therefore, investors might want to keep a close eye on this stock for a potentially better entry point from a valuation perspective or when the stock starts showing a sustained turn in price direction.
