Could Celsius Holdings Stock Set You Up for Life?

Energy drink maker Celsius Holdings (CELH) has been a rollercoaster ride for investors, with its stock price nearly quintupling in two years before dropping by two-thirds in the last five months. But could this mid-cap stock rise to Monster-level gains in the long run, setting early investors up for life? Let's explore the opportunities and risks of investing in Celsius Holdings today.



Celsius Holdings has a unique angle in the energy drink market, focusing on all-natural ingredients and health-oriented research claims. This strategy has resonated with consumers, with the company's revenue soaring 10x from 2020 to 2023, reaching $1.32 billion. Its 11% share of the North American energy drink market is up from practically nothing a few years ago, demonstrating impressive growth.



Celsius' health-oriented products might just be what the doctor ordered. Trailing sales have soared 506% higher in three years, and the company generates healthy cash profits. With healthier food options always in demand, Celsius could continue to rise in the long haul. Having a world-class distribution partner like PepsiCo (PEP) can also be a powerful selling point when negotiating supply contracts with retailers.

However, Celsius isn't a slam-dunk winner. Pepsi recently reduced the energy drink maker's inventory levels due to lower end-market demand, posing a risk to Celsius' growth trajectory. Consumer tastes are notoriously fickle, and even market darlings like Peloton (PTON) can face plunging consumer interest. Moreover, Celsius' stock remains overvalued, trading at 30.6 times earnings and 29.6 times free cash flow, comparable to Monster Beverage's multiples.



The energy drink market is becoming increasingly crowded, with efficient distributor setups like Keurig Dr. Pepper (KDP) buying energy drink start-ups like Ghost. If Monster and Red Bull can't stave off the Celsius challenge, maybe a properly supported Ghost brand will. In other words, Celsius Holdings stock may be overpriced right now, and if the health-conscious marketing strategy doesn't hold up over the years, Celsius investors could be in for a painful future.

So, should you buy Celsius Holdings stock today? While there are upsides and risks, it's essential to keep your investment relatively small and diversify your portfolio. Celsius could play a supporting role in a diversified portfolio, adding a boost to your overall holdings if everything comes up aces over time. But if things go wrong, the price drop should be balanced out by other sectors and industries.

In conclusion, Celsius Holdings' unique health-oriented product strategy differentiates it from competitors like Monster Beverage and Red Bull. However, the energy drink market's growth and consumer preferences, along with Celsius' distribution partnership with PepsiCo, will significantly impact its long-term investment prospects. Investors should carefully consider the opportunities and risks before deciding whether Celsius Holdings stock could set them up for life.