In recent years, the company has emerged as a key player in the field of innovative and healthier energy drink alternatives. Its strong results in the last quarter and record sales, which surpassed previous years, confirm its growth trend. Leveraging its expansion into new markets and cost optimization bring promising prospects for the future, despite the temporary challenges this sector may present.

Today, we look at a company that has proven it can playfully overcome and build on its performance during a pandemic. Even though the stock hasn't done so well over the past year, analysts are still optimistic given the international expansion, solid results and investments of a giant like Pepsi.

Company performance

Celsius Holdings $CELH is a major player in the global beverage market, focusing on energy drinks and dietary supplements. Their flagship product is the CELSIUS brand, a line of functional energy drinks designed to boost metabolism, burn calories and provide energy during physical activity. These drinks are often sought after by athletes, fitness enthusiasts and people looking for a healthier alternative to traditional energy drinks.

The company operates primarily in the United States market, where it is headquartered, but is gradually expanding its reach into international markets, including Europe and Asia. Celsius Holdings emphasizes innovation and health, which is reflected in their products that contain no artificial preservatives, added sugars or aspartame. In addition, their beverages are enriched with vitamins and natural ingredients that promote health and vitality.

The company's history dates back to 2004, when it was founded with the goal of bringing an innovative product to market that would combine a refreshing beverage with health benefits. The first CELSIUS product was launched in 2005 and since then the company has experienced significant growth. Over the years, it has built a strong market position by continuously expanding its product line and entering new markets. Interestingly, from the beginning, the company has emphasized scientific research and clinical studies to back up its claims of health benefits of its products.

Celsius Holdings also focuses on sustainability and social responsibility, which is reflected in both its choice of raw materials and its manufacturing processes. The company strives to minimize its environmental impact while contributing to the development of the communities in which it operates.

Today, Celsius Holdings is a dynamic, growing company that is constantly innovating its products and seeking new opportunities for expansion. Through its commitment to quality, health and sustainability, it maintains a strong market position and is increasingly popular with consumers around the world.

What makes the company interesting?

Celsius Holdings, a well-known energy drink manufacturer, has experienced tremendous growth over the past decade, but its best growth years are a distant memory for now. The company, which focuses on healthier, sugar-free energy drink alternatives, has seen a huge surge in popularity during the pandemic, and especially after a strategic investment from PepsiCo in 2022. This investment increased its market presence and contributed to significant revenue growth.

Although growth is slowing, the company is still showing strong results, especially with expansion into international markets such as Canada, the UK and Ireland, and plans for further expansion. With a growing market share in the US and plans to expand in other countries, Celsius still has potential for growth.

The company also has a strong financial position with a high cash position and virtually no debt, which opens up opportunities for share buybacks that could further appreciate the stock. On the surface, the company's results aren't too bad, the company is showing growth, it just fell short of analysts' estimates, which has also dragged the share price down -33.54% this year. However, this stock has been overvalued for quite some time, and judging by the fair prices on Bulios, we are slowly finally approaching a fair price.

Current events

The biggest concern surrounding Celsius Holdings is the apparent slowdown in revenue growth and declining market share. While objectively solid, the company's 23.4% year-over-year revenue growth in Q2 2024 falls short of the high expectations set by earlier exceptional growth figures. Moreover, in the four-week period ended July 14, Celsius Holdings held an 11% share in the MULOC category, down 50 basis points from the prior quarter, raising concerns about the company's ability to maintain a competitive advantage in a saturated market.

Despite its strong position in the energy drink market, Celsius Holdings is facing broader industry challenges, including energy drink fatigue, growing health concerns and a general decline in discretionary spending. The market is increasingly crowded, with new entrants vying for consumer attention and market share. As a result, it is increasingly difficult for the company to differentiate itself from competitors such as Monster Beverage and Red Bull, which have long dominated the market.

In addition, CELH's heavy reliance on distribution partnerships is another potential vulnerability. While the recent partnership with PepsiCo has spurred growth, over-reliance on a single partner can be problematic. PepsiCo's efforts to better manage inventory have led to a reduction in Celsius Holdings' revenue growth, exposing the vulnerability of this partnership. As PepsiCo seeks more favorable terms and more efficient operations, CELH may have difficulty sustaining its growth without relying so heavily on PepsiCo's distribution network.

Industry experts have noted the disadvantage of Celsius Holdings' limited international footprint, with only about 5 % of its revenues coming from outside North America. Slow international expansion and reliance on the North American market expose the company to increased risks, especially if domestic growth stalls or it faces increased competition.

Another area of concern is margins. Despite the improvement in gross margins during the second quarter, CELH has adopted a cautious outlook for the remainder of the year. This caution reflects concerns about rising raw material costs, such as aluminum and fuel, and the potential impact of a larger promotional incentive calendar. Investors may see this as a sign of possible margin compression in the future.

Last quarter's results

Celsius Holdings delivered record results in the second quarter of 2024, with revenues up 23% to $402 million compared to the same period in the prior year. Gross profit increased 32% to $209.1 million, contributing to an improved gross margin of 52%.

The company's net income was $79.8 million, up 55% from the prior year, and diluted earnings per share increased 65% to $0.28. For the first half of 2024, the company also reported significant revenue growth of 29% to $757.7 million, with net income up 70% to $157.6 million.

The company saw growth in both the North American and international markets, with international sales up 36%. This strong financial performance reflects the company's successful strategy to optimize costs and expand market share in the energy drink category.

As you can see, the results are not bad at all, but the stock price follows the pessimism in terms of not meeting estimates.

International expansion

Celsius launched sales in the UK and Ireland in the second quarter of 2024 through the fitness channel and in select gyms.

Sales in Canada continued to exceed the Company's original expectations in the second quarter of 2024, during which time we launched CELSIUS Sparkling Green Apple Cherry into the Canadian market.

Sales in Australia, France and New Zealand are expected to commence in the second half of this year and expand their reach during 2025.

Further outlook

Investment analysts at Roth Capital raised their Q4 2025 EPS estimates for shares of Celsius in a report published on Tuesday, August 6th. Roth Capital analyst S. Mcgowan now forecasts that the company will post earnings of $0.31 per share for the quarter, up from their previous estimate of $0.30. The consensus estimate for Celsius' current full-year earnings is $1.05 per share. Roth Capital also issued estimates for Celsius' Q1 2026 earnings at $0.31 per share and Q2 2026 earnings at $0.36 per share.

For the next fiscal year, the consensus earnings estimate of $1.34 implies a change of +27.6% from what Celsius was expected to report a year ago.

Long-term results

Over the past 12 months, Celsius Holdings has achieved record revenues of $1.49 billion, up significantly from $1.32 billion in 2023. This growth has been supported by both strong domestic performance and continued expansion into international markets. Gross profit for 2023 was US$633 million, also a record amount and up from US$270 million in 2022. Profit margin increased to 50.5% from 48.0% previously.

Operating expenses in 2023 amounted to US$366 million, down from US$428 million in 2022. Despite the increase in operating expenses, the company achieved a positive operating profit of US$334.1 million, a significant improvement from the previous year's operating profit of US$266.4 million.

Buy, sell or hold Celsius stock?

Celsius is likely exiting its young-company phase of life, but it could be entering that sweet spot where it's still growing and profitable enough to share its profits with investors.

At that point, investors can reasonably use the profits to value the stock. Today, Celsius is trading at 37 times 2024 earnings estimates. Meanwhile, analysts expect Celsius' earnings to grow at an average annual rate of 31% over the next three to five years.

That seems realistic if Celsius can maintain annual revenue growth of 20% or better over the next few years. Sales in the first half of 2024 are up 29% year-over-year company-wide, so there is still plenty of sales momentum. The company's increasing contribution to overall growth in the energy drink category should also give investors confidence that consumers want the Celsius brand.

Assuming this continues and Celsius grows at the same level as expected, the stock's decline has made it attractive. Long-term investors should have no problem paying 37 times earnings for a company that grows those earnings by more than 30% annually. That's a PEG ratio of just 1.2.

Analysts' expectations

Based on 15 Wall Street analysts who have offered 12-month price targets for Celsius Holdings over the last 3 months. The average target price is $64.00 with a high forecast of $87.00 and a low forecast of $32.00.

Disclaimer: There is a lot of inspiration to be found on Bulios, however stock selection, strategy and portfolio construction is up to you, so always do thorough self-analysis and educate yourself.