Celsius Holdings: A Monster Growth Stock Down 70%, but Ready for a Comeback
Sunday, Nov 24, 2024 5:05 am ET
4min read Celsius Holdings (CELH), the innovative energy drink maker, has experienced a 70% drop from its highs this year. However, this setback might present an opportunity for long-term investors. With its unique positioning in the energy drink market and plans for international expansion, Celsius is poised for a comeback.
Celsius disrupted the energy drink market by targeting health-conscious consumers with sugar-free, vitamin-infused beverages. Its strategy proved successful, with the company achieving over 10% market share in the U.S. and reporting $1.37 billion in revenue over the last 12 months. Despite a 33% year-over-year revenue drop in Q3 due to distribution channel normalization, Celsius maintained its 10%+ market share and saw retail sales through the first three quarters already higher than all of 2023.
Understanding the Pepsi distribution headwind
The recent revenue drop is mainly due to a distribution deal with PepsiCo. While the deal provides access to Pepsi's extensive distribution network, it also led to inventory normalization, causing a temporary revenue decline. However, this issue is expected to resolve in 2025, allowing Celsius to return to double-digit revenue growth.
International expansion and new distribution channels
Celsius' international expansion is another catalyst for future growth. The company has entered the Canadian, U.K., Australian, and French markets, with plans for more countries in the coming years. International revenue grew 37% year over year last quarter, indicating significant potential. By leveraging Pepsi's distribution network and reaching a broader customer base, Celsius aims to drive long-term growth.
Pricing power and category expansion
Celsius' formidable pricing power and category expansion strategy have been key drivers behind its market share growth. Despite the recent revenue drop, Celsius maintained its 10%+ market share in the U.S. energy drink category, demonstrating the strength of its pricing power. Moreover, its category expansion strategy – targeting gym goers, women, and younger people, and positioning its drinks as health beverages – has helped it penetrate the energy drink market and also compete with other beverage categories like coffee, soda, and fruit juices.
Challenges and opportunities
While Celsius faces temporary headwinds due to its distribution deal with Pepsi, its long-term growth prospects remain strong. The company must navigate international market entry challenges, adapt its marketing strategy to different consumer preferences, and maintain its pricing power. However, Celsius' unique product offering and growing international demand present significant long-term opportunities.
In conclusion, Celsius Holdings' recent 70% drop from its highs might represent an attractive buying opportunity for patient investors. Its international expansion, pricing power, and category expansion strategy position the company for a strong comeback. As the temporary distribution channel normalization issue resolves, Celsius is expected to return to double-digit revenue growth in 2025. Investors should carefully monitor the company's progress and consider adding CELH to their portfolios at its current undervalued price.
Celsius disrupted the energy drink market by targeting health-conscious consumers with sugar-free, vitamin-infused beverages. Its strategy proved successful, with the company achieving over 10% market share in the U.S. and reporting $1.37 billion in revenue over the last 12 months. Despite a 33% year-over-year revenue drop in Q3 due to distribution channel normalization, Celsius maintained its 10%+ market share and saw retail sales through the first three quarters already higher than all of 2023.
Understanding the Pepsi distribution headwind
The recent revenue drop is mainly due to a distribution deal with PepsiCo. While the deal provides access to Pepsi's extensive distribution network, it also led to inventory normalization, causing a temporary revenue decline. However, this issue is expected to resolve in 2025, allowing Celsius to return to double-digit revenue growth.
International expansion and new distribution channels
Celsius' international expansion is another catalyst for future growth. The company has entered the Canadian, U.K., Australian, and French markets, with plans for more countries in the coming years. International revenue grew 37% year over year last quarter, indicating significant potential. By leveraging Pepsi's distribution network and reaching a broader customer base, Celsius aims to drive long-term growth.
Pricing power and category expansion
Celsius' formidable pricing power and category expansion strategy have been key drivers behind its market share growth. Despite the recent revenue drop, Celsius maintained its 10%+ market share in the U.S. energy drink category, demonstrating the strength of its pricing power. Moreover, its category expansion strategy – targeting gym goers, women, and younger people, and positioning its drinks as health beverages – has helped it penetrate the energy drink market and also compete with other beverage categories like coffee, soda, and fruit juices.
Challenges and opportunities
While Celsius faces temporary headwinds due to its distribution deal with Pepsi, its long-term growth prospects remain strong. The company must navigate international market entry challenges, adapt its marketing strategy to different consumer preferences, and maintain its pricing power. However, Celsius' unique product offering and growing international demand present significant long-term opportunities.
In conclusion, Celsius Holdings' recent 70% drop from its highs might represent an attractive buying opportunity for patient investors. Its international expansion, pricing power, and category expansion strategy position the company for a strong comeback. As the temporary distribution channel normalization issue resolves, Celsius is expected to return to double-digit revenue growth in 2025. Investors should carefully monitor the company's progress and consider adding CELH to their portfolios at its current undervalued price.
Disclaimer: the above is a summary showing certain market information. AInvest is not responsible for any data errors, omissions or other information that may be displayed incorrectly as the data is derived from a third party source. Communications displaying market prices, data and other information available in this post are meant for informational purposes only and are not intended as an offer or solicitation for the purchase or sale of any security. Please do your own research when investing. All investments involve risk and the past performance of a security, or financial product does not guarantee future results or returns. Keep in mind that while diversification may help spread risk, it does not assure a profit, or protect against loss in a down market.