Celsius Holdings has been a reputable name in the energy drink market, particularly appreciated for its significant growth over the past decade. However, 2024 has posed some challenges for the company, with its shares plunging by over 35% year-to-date. This could potentially mark the worst performance since 2011 for Celsius investors. The big question circulating in the investment community is whether this downturn presents an intriguing buying opportunity.
Historically, Celsius has been a fruitful venture for stockholders, boasting robust returns year after year. With the exception of a couple of off years, including a notable drop of 33.9% in 2018, the stock has a history of exceeding 20% annual returns. The standout year of 2020 saw the stock skyrocket by a staggering 941.6%. Such explosive growth often sets high expectations, making it tough for the stock to maintain its previous allure among growth investors.
This year, however, has featured slower sales growth. The departure from high-octane expansion may be attributed to a strategic decision by PepsiCo, a significant distribution partner for Celsius, to trim down its inventory of Celsius products. This tactic raises concerns that the company’s growth may continue to lag, dampening the overall market sentiment surrounding its stock. The heightened uncertainty has translated into reduced demand for shares, resulting in a more modest trading multiple. The current valuation, pegged at over five times its trailing revenues, illustrates this shift.
Despite these challenges, the revenue figures tell a different story: through the first half of 2024, Celsius reported $757.7 million in revenue, representing a 29% increase when compared to the previous year. While this growth is commendable, it is essential to note that in the past, Celsius frequently achieved much higher annual growth rates, sometimes even doubling its top-line revenue. As the market adjusts to this new reality, the fervor for Celsius shares has significantly diminished.
An optimistic perspective reveals that despite recent struggles, Celsius has turned a profit and is expected to maintain a respectable earnings multiple of approximately 32 times next year’s anticipated profits. This valuation seems reasonable for a company that continues to see growth of around 30%. Furthermore, Celsius’s recent international expansion initiatives provide a promising avenue for future growth and profitability.
Given these dynamics, some investors may view this as an opportune moment to consider Celsius stock. With its ongoing growth strategies and improving fundamentals, those willing to adopt a long-term investment horizon may find Celsius to be an appealing addition to their portfolios.
Nevertheless, prospective investors are urged to carefully weigh their options. The Motley Fool’s Stock Advisor team has highlighted other stocks that they believe offer superior potential at this time, indicating that while Celsius has proven its worth in the past, it may not currently be the top choice among investment experts.
In summary, there’s a confluence of factors to consider when evaluating Celsius Holdings. From historical performance and growth prospects to recent challenges and market conditions, the landscape is intricate. As the energy drink market evolves, keeping a pulse on Celsius’s trajectory could furnish valuable insights for savvy investors looking to navigate these turbulent waters. Whether it ends up being a worthwhile investment or a missed opportunity will hinge on ongoing market developments and the company’s responses to current hurdles.