Celsius Holdings Stock at 52-Week Low: What's Next for CELH Investors?

Zacks

Celsius Holdings, Inc. CELH, a high-profile player in the energy drink market known for its health-conscious branding, saw its stock dive to its 52-week low of $25.77 on Tuesday, closing the trading session at $26.96. This drop has raised questions for investors about the causes of the decline and whether now is the right time to buy, hold or sell CELH stock.

Shares of CELH have slumped 31.8% in the past three months, much wider than the industry's drop of 1.9% and the broader Zacks Consumer Staples sector’s decline of 2.3%. The company also trailed the S&P 500's growth of 10.6% during the same period. CELH is trading below its 50 and 200-day moving averages, indicating potential weakness in the stock's momentum.

CELH Price Performance vs. Industry, S&P 500 & Sector

With a mix of factors — from operational challenges to competitive pressures — contributing to the stock’s downward movement, let’s delve deeper into what’s driving Celsius Holdings lower and whether there are signs of value at these levels.

What’s Behind CELH’s Significant Pullback?

One of the most significant contributors to CELH stock’s drop is the company’s recent financial performance. Celsius Holdings reported a steep 31% year-over-year revenue decline to $265.7 million in the third quarter of 2024 due to inventory optimization adjustments from its largest distributor, PepsiCo PEP. This inventory adjustment impacted the company’s revenues by roughly $124 million. Although management anticipates better inventory alignment in the fourth quarter, these adjustments signal potential volatility in the company’s supply chain, raising concerns about the consistency of future revenue streams.

Broader macroeconomic trends have been posing challenges for companies in the energy drinks market. Consumer fatigue with energy drinks, a shift toward more health-conscious products and reduced discretionary spending are putting pressure on the industry. Declining consumer traffic in some key channels has been weighing on demand for Celsius Holdings. A weaker consumer outlook can impact the company’s growth, particularly given its position as a premium brand in the energy drink sector.

Celsius Holdings also faces intensified competition from industry leaders such as Red Bull and Monster Beverage MNST, both of which have significantly invested in sugar-free and health-oriented products. This competitive landscape puts pressure on Celsius Holdings’ market share, particularly in convenience stores where foot traffic has declined. The need for aggressive promotional pricing to compete also weighs on the company’s margins.

Celsius Holdings faced margin pressure in the third quarter of 2024, wherein the gross margin contracted 440 basis points to 46%. The margin reduction was driven by the full ramp-up of an incentive program with PepsiCo, which is designed to bolster market share but has come at the expense of profitability. Sales and marketing expenses also remained high at 37.6% of revenues, underscoring the company’s substantial investment in brand-building. These spending requirements, coupled with competitive pressures, raise concerns over short-term profitability.

Celsius Holdings: What Do Analysts Forecast Next?

The Zacks Consensus Estimate for the current and next fiscal year earnings per share has moved downward over the past seven days. This downward adjustment reflects a negative sentiment among analysts and suggests potential challenges in achieving projected profitability.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Is CELH Stock Still Overpriced?

Celsius Holdings' valuation continues to be a matter of debate. Despite the pullback in the stock price, CELH is trading at a premium relative to industry peers, which seems difficult to justify given the soft revenues and margin concerns. The company is currently trading at a forward 12-month P/E of 29.50, much higher than the industry’s 15.96. Celsius Holdings’ Value Score of D further reinforces these concerns.

CELH's Strategic Moves: Paving the Way for Future Growth

Celsius Holdings is intensifying its strategic efforts to recover from recent setbacks. The company is making substantial investments in innovation, branding and marketing, with a keen emphasis on bolstering its competitive edge. By consistently launching new flavors and product variations, Celsius Holdings aims to align with evolving consumer tastes, positioning itself to regain momentum in an intensely competitive market.

A core strength of Celsius Holdings is its extensive presence across major retail channels. The company has secured shelf space in top retail chains, convenience stores and online platforms, broadening its market footprint. The company has strengthened its distribution network through diverse channels, including e-commerce and food service, which make up a substantial portion of its revenue base.

CELH’s sales to Amazon surged 21% to $27 million in the third quarter of 2024. Moving on, about 12.3% of the company’s total North America sales to PepsiCo in the quarter came from the foodservice sector – including solid performance across workplaces, restaurants, recreational locations, hotels and gaming establishments. Sales to Costco COST advanced 15% in the quarter, demonstrating strong brand affinity across multiple retail environments. This diversified channel strategy supports steady revenue growth, insulating Celsius Holdings from seasonal and channel-specific fluctuations.

Apart from this, CELH has strategically entered new markets in Australia, New Zealand and France, with partnerships like Tesco and 7-Eleven providing immediate access to local consumers. This expansion capitalizes on global health trends similar to those seen in the United States, making Celsius Holdings well-positioned to gain a foothold in these high-growth markets. The entry into the UK and other regions also showcases the company’s commitment to international growth, offering a pathway to diversify revenue sources and reduce dependence on the North American market over time.

Navigating CELH Stock: A Guide for Investors

Celsius Holdings presents a mixed but intriguing opportunity for investors. While the company faces challenges in a competitive market, its focus on innovation, brand building and expanding distribution channels demonstrates a strong commitment to growth. However, with the stock trading at a premium and ongoing profitability concerns, investors need to balance the company’s growth prospects with the risks associated with its near-term performance. Potential investors may want to wait it out, while existing shareholders may consider holding their positions, given CELH’s long-term potential and strategic initiatives aimed at market expansion. The company currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Investors Heavily Search Celsius Holdings Inc. (CELH): Here is What You Need to Know

Zacks

Celsius Holdings

-0.41%

Celsius Holdings Inc. (CELH) has been one of the most searched-for stocks on Zacks.com lately. So, you might want to look at some of the facts that could shape the stock's performance in the near term.

Shares of this company have returned -21.1% over the past month versus the Zacks S&P 500 composite's +3% change. The Zacks Food - Miscellaneous industry, to which Celsius belongs, has lost 3.5% over this period. Now the key question is: Where could the stock be headed in the near term?

While media releases or rumors about a substantial change in a company's business prospects usually make its stock 'trending' and lead to an immediate price change, there are always some fundamental facts that eventually dominate the buy-and-hold decision-making.

Revisions to Earnings Estimates

Rather than focusing on anything else, we at Zacks prioritize evaluating the change in a company's earnings projection. This is because we believe the fair value for its stock is determined by the present value of its future stream of earnings.

Our analysis is essentially based on how sell-side analysts covering the stock are revising their earnings estimates to take the latest business trends into account. When earnings estimates for a company go up, the fair value for its stock goes up as well. And when a stock's fair value is higher than its current market price, investors tend to buy the stock, resulting in its price moving upward. Because of this, empirical studies indicate a strong correlation between trends in earnings estimate revisions and short-term stock price movements.

Celsius is expected to post earnings of $0.13 per share for the current quarter, representing a year-over-year change of -23.5%. Over the last 30 days, the Zacks Consensus Estimate has changed -20%.

For the current fiscal year, the consensus earnings estimate of $0.70 points to a change of -9.1% from the prior year. Over the last 30 days, this estimate has changed -14.4%.

For the next fiscal year, the consensus earnings estimate of $0.94 indicates a change of +33.8% from what Celsius is expected to report a year ago. Over the past month, the estimate has changed -6.6%.

Having a strong externally audited track record, our proprietary stock rating tool, the Zacks Rank, offers a more conclusive picture of a stock's price direction in the near term, since it effectively harnesses the power of earnings estimate revisions. Due to the size of the recent change in the consensus estimate, along with three other factors related to earnings estimates, Celsius is rated Zacks Rank #3 (Hold).

The chart below shows the evolution of the company's forward 12-month consensus EPS estimate:

12 Month EPS

Projected Revenue Growth

While earnings growth is arguably the most superior indicator of a company's financial health, nothing happens as such if a business isn't able to grow its revenues. After all, it's nearly impossible for a company to increase its earnings for an extended period without increasing its revenues. So, it's important to know a company's potential revenue growth.

In the case of Celsius, the consensus sales estimate of $338.15 million for the current quarter points to a year-over-year change of -2.7%. The $1.36 billion and $1.58 billion estimates for the current and next fiscal years indicate changes of +3.3% and +16.1%, respectively.

Last Reported Results and Surprise History

Celsius reported revenues of $265.75 million in the last reported quarter, representing a year-over-year change of -30.9%. EPS of $0 for the same period compares with $0.30 a year ago.

Compared to the Zacks Consensus Estimate of $266.13 million, the reported revenues represent a surprise of -0.14%. The EPS surprise was -100%.

Over the last four quarters, Celsius surpassed consensus EPS estimates three times. The company topped consensus revenue estimates two times over this period.

Valuation

Without considering a stock's valuation, no investment decision can be efficient. In predicting a stock's future price performance, it's crucial to determine whether its current price correctly reflects the intrinsic value of the underlying business and the company's growth prospects.

Comparing the current value of a company's valuation multiples, such as its price-to-earnings (P/E), price-to-sales (P/S), and price-to-cash flow (P/CF), to its own historical values helps ascertain whether its stock is fairly valued, overvalued, or undervalued, whereas comparing the company relative to its peers on these parameters gives a good sense of how reasonable its stock price is.

The Zacks Value Style Score (part of the Zacks Style Scores system), which pays close attention to both traditional and unconventional valuation metrics to grade stocks from A to F (an An is better than a B; a B is better than a C; and so on), is pretty helpful in identifying whether a stock is overvalued, rightly valued, or temporarily undervalued.

Celsius is graded C on this front, indicating that it is trading at par with its peers. Click here to see the values of some of the valuation metrics that have driven this grade.

Bottom Line

The facts discussed here and much other information on Zacks.com might help determine whether or not it's worthwhile paying attention to the market buzz about Celsius. However, its Zacks Rank #3 does suggest that it may perform in line with the broader market in the near term.

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Risk Warnings and Disclaimers

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Celsius Holdings: Big Drop, Big Opportunity? Analysts Say Yes

MarketBeat

Celsius Holdings Inc. delivered a poor earnings report on November 6. Investors had been forewarned that the company was likely to miss on the top and bottom lines, but the size of the miss was enough to send shares lower.

Celsius delivered revenue of $265.75 million, which was lower than analysts’ expectations of $267.54 million and 30% lower than the $384.8 million the company reported in the same quarter in 2023. Earnings were worse, with the company’s earnings coming in flat, missing expectations by three cents.

At the end of the trading session on November 8, CELH stock was down 8.9% for the week and approximately 47% in 2024. Consumer staples stocks have been under pressure in 2024, and that’s been particularly reflected in the entire energy drink sector. Even sector leader Monster Beverage Corp. is down about 6% for the year.

But Celsius is the worst performer by far. This comes after several years when the company, which touts its “healthy” energy drinks, outperformed the sector. However, that drove up the company’s valuation, which may be coming back to haunt investors.

Convenience Store Traffic Is Weighing on Sales

The revenue shortfall for Celsius was largely due to what it referred to as “supply chain optimization” by its largest distributor, PepsiCo Inc. . Celsius warned of this prior to the earnings report, but the extent of the shortfall was revealed during earnings.

The concept illustrates the consumer’s key role in the company’s results. Last year, Pepsi overordered Celsius products to keep up with strong demand. However, with that demand tailing off, Pepsi is taking steps to right-size its inventory.

One of the key areas that Celsius is reporting weakness in convenience stores which accounts for approximately 62% of energy drink sales. Traffic is down in 2024 and therefore sales are down.

The story gets worse for Celsius because the company was successful at raising prices as consumer were willing to pay a premium for a product that was seen as having healthy, if somewhat exaggerated, benefits. Those benefits are taking a back seat to a stressed consumer as well as more competition in the energy drink sector.

The Case for and the Case Against

There were some bright spots in the company’s earnings report. First, management reports a tighter correlation between sell-in and sell-through, which supports their belief that the situation is nearly behind. With Pepsi having an 8.5% stake in Celsius, which amounts to $550 million, both sides are incentivized to return to growth.

Second, Celsius still registered a 46% gross margin for the quarter. This is a profitable company and is becoming more profitable every year.

Third, international growth was a bright spot in the report, with international sales beating expectations and increasing year-over-year. Finally, the company has a strong balance sheet with approximately $900 million of cash or cash equivalents and virtually no debt.

But there are some short-term concerns. While the inventory situation may be getting better, it’s likely to still impact revenue for at least the next quarter or two. Also, at over 40x trailing twelve-month earnings and 39x forward earnings, CELH stock remains expensive, particularly as revenue is under pressure.

Is CELH Stock a Buy? Analysts See 80% Upside Potential

Analysts have been quick to lower their price targets for CELH stock. That said, the Celsius analyst forecasts on MarketBeat show that none of the analysts who lowered their price targets have downgraded the stock. The consensus price target is $54.40, which offers investors an upside of over 80%.

The stock does look to have found a bottom near its closing price on November 8. However, the options chain suggests that there is more bearish sentiment in the short term, which can make it a difficult stock to trade. As a long-term investment, investors may be about a quarter or two away from taking a position.

Risk Warnings and Disclaimers

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