We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Is CELH Stock's 31.5X PE Still Worth It? Time to Buy, Sell or Hold?
Read MoreHide Full Article
Celsius Holdings, Inc. (CELH - Free Report) is currently trading at a forward 12-month price-to-earnings (P/E) ratio of 31.47, significantly higher than the industry average of 16.81 and the S&P 500’s 20.88. This disparity suggests that investors have historically had high expectations for the company's future earnings growth. However, CELH’s recent stock performance casts doubt on whether these lofty expectations are sustainable.
Image Source: Zacks Investment Research
Shares of Celsius Holdings have plunged 47.3% in the past three months against the industry’s growth of 8.2%. The energy drink company trailed the broader Zacks Consumer Staples sector and the S&P 500's respective growth of 8.8% and 0.8% during the same period. CELH is trading below its 50 and 200-day moving averages, indicating potential weakness in the stock's momentum.
Image Source: Zacks Investment Research
The combination of a high P/E and a stock decline could mean that the market may be questioning the company's ability to meet these elevated expectations. This discrepancy raises concerns about whether CELH’s current valuation is justified or if the stock is overly inflated in the near term.
Troubles Brewing for Celsius Holdings
Celsius Holdings is encountering several issues that could hinder its future performance. Despite delivering a solid year-over-year revenue increase in the second quarter of 2024, signs of decelerating growth, shrinking market share and external challenges raise concerns about Celsius' ability to sustain its upward trajectory.
Although the company reported a 23.4% year-over-year revenue increase in the second quarter of 2024, which is strong in absolute terms, it falls short of the lofty expectations set by its previous impressive growth. During the four-week period ended July 14, Celsius held an 11% share of the MULOC category, reflecting a 50-basis point decline from the previous quarter. This dip in market share has raised concerns about CELH’s ability to maintain its competitive positioning in an increasingly saturated market.
Despite having a solid foothold in the energy drink sector, Celsius is grappling with broader industry headwinds, including consumer fatigue with energy drinks, rising health-consciousness and weaker discretionary spending. The market is becoming more crowded, with new players competing for consumer attention and market share. As a result, Celsius is finding it harder to differentiate itself from long-established giants like Monster Beverage (MNST - Free Report) and Red Bull.
Another potential vulnerability is the company’s heavy reliance on distribution partnerships. While its recent collaboration with PepsiCo (PEP - Free Report) has bolstered growth, over-dependence on a single partner can be risky. PepsiCo's focus on improving inventory management has led to slower sales growth for Celsius Holdings. As PepsiCo seeks better terms and greater operational efficiency, CELH could face challenges in maintaining its growth without leaning so heavily on this partnership.
Celsius also faces limitations in its international presence, with only around 5% of revenues coming from outside North America. This sluggish international expansion makes the company heavily dependent on its domestic market, leaving it vulnerable to heightened risks if growth in North America slows or competition intensifies.
Margins are another area of concern. While Celsius improved its gross margins in the second quarter, the company has taken a cautious stance for the remainder of the year. This conservative outlook stems from concerns over rising costs for raw materials like aluminum and fuel, as well as the potential impact of a more aggressive promotional strategy. Investors may interpret this as a warning of potential margin pressure in the near future.
CELH Estimates: More Pain Ahead?
Reflecting the negative sentiment around Celsius Holdings, the Zacks Consensus Estimate for EPS has seen downward revisions. Over the past seven days, analysts have lowered their estimates for both the current quarter and fiscal year by 58.3% and 15% to 10 cents per share and 85 cents, respectively. The consensus mark for the next fiscal year has also dived 13.1% to $1.06 in the same time span. This downward adjustment reflects a negative sentiment among analysts and suggests potential challenges in achieving projected profitability.
Image Source: Zacks Investment Research
Can Growth Initiatives Reverse CELH’s Decline?
Celsius Holdings is doubling down on strategic efforts aimed at driving growth and recapturing lost market share. The company continues to invest heavily in innovation, branding and marketing, with a clear focus on bolstering its competitive edge. By consistently launching new flavors and product variations, Celsius is aligning itself with changing consumer preferences, positioning itself to regain ground in a crowded marketplace.
One key advantage for Celsius is its presence across major retail channels. The company has successfully secured shelf space in prominent retail chains, convenience stores and e-commerce platforms, broadening its market access. Partnerships with industry heavyweights like Walmart, Target (TGT - Free Report) and Amazon have been instrumental in enhancing its visibility and reach.
Celsius Holdings is also actively working to increase its footprint in the energy drink sector. The company’s strategy to diversify its product range and enter new markets showcases a proactive approach to growing its consumer base. This diversification could provide new revenue streams and help reduce its dependency on the North American market.
These strategies aim to give Celsius Holdings the resources it needs to tackle its current challenges and take advantage of future opportunities in the competitive energy drink market.
Navigating CELH: Investors’ Roadmap
While Celsius Holdings is committed to growth through strategic initiatives, recent performance and valuation metrics raise serious concerns. The combination of decelerating revenue growth, shrinking market share, reliance on a single distribution partner, rising raw material costs and downward EPS revisions all point to potential financial pressures. With a high valuation, operational challenges and industry headwinds, Celsius Holdings appears risky in the near term. Without a clear catalyst to reverse its recent struggles, the stock could face further downside, and investors may want to approach with caution.
Celsius Holdings currently carries a Zacks Rank #5 (Strong Sell).
Image: Bigstock
Is CELH Stock's 31.5X PE Still Worth It? Time to Buy, Sell or Hold?
Celsius Holdings, Inc. (CELH - Free Report) is currently trading at a forward 12-month price-to-earnings (P/E) ratio of 31.47, significantly higher than the industry average of 16.81 and the S&P 500’s 20.88. This disparity suggests that investors have historically had high expectations for the company's future earnings growth. However, CELH’s recent stock performance casts doubt on whether these lofty expectations are sustainable.
Image Source: Zacks Investment Research
Shares of Celsius Holdings have plunged 47.3% in the past three months against the industry’s growth of 8.2%. The energy drink company trailed the broader Zacks Consumer Staples sector and the S&P 500's respective growth of 8.8% and 0.8% during the same period. CELH is trading below its 50 and 200-day moving averages, indicating potential weakness in the stock's momentum.
Image Source: Zacks Investment Research
The combination of a high P/E and a stock decline could mean that the market may be questioning the company's ability to meet these elevated expectations. This discrepancy raises concerns about whether CELH’s current valuation is justified or if the stock is overly inflated in the near term.
Troubles Brewing for Celsius Holdings
Celsius Holdings is encountering several issues that could hinder its future performance. Despite delivering a solid year-over-year revenue increase in the second quarter of 2024, signs of decelerating growth, shrinking market share and external challenges raise concerns about Celsius' ability to sustain its upward trajectory.
Although the company reported a 23.4% year-over-year revenue increase in the second quarter of 2024, which is strong in absolute terms, it falls short of the lofty expectations set by its previous impressive growth. During the four-week period ended July 14, Celsius held an 11% share of the MULOC category, reflecting a 50-basis point decline from the previous quarter. This dip in market share has raised concerns about CELH’s ability to maintain its competitive positioning in an increasingly saturated market.
Despite having a solid foothold in the energy drink sector, Celsius is grappling with broader industry headwinds, including consumer fatigue with energy drinks, rising health-consciousness and weaker discretionary spending. The market is becoming more crowded, with new players competing for consumer attention and market share. As a result, Celsius is finding it harder to differentiate itself from long-established giants like Monster Beverage (MNST - Free Report) and Red Bull.
Another potential vulnerability is the company’s heavy reliance on distribution partnerships. While its recent collaboration with PepsiCo (PEP - Free Report) has bolstered growth, over-dependence on a single partner can be risky. PepsiCo's focus on improving inventory management has led to slower sales growth for Celsius Holdings. As PepsiCo seeks better terms and greater operational efficiency, CELH could face challenges in maintaining its growth without leaning so heavily on this partnership.
Celsius also faces limitations in its international presence, with only around 5% of revenues coming from outside North America. This sluggish international expansion makes the company heavily dependent on its domestic market, leaving it vulnerable to heightened risks if growth in North America slows or competition intensifies.
Margins are another area of concern. While Celsius improved its gross margins in the second quarter, the company has taken a cautious stance for the remainder of the year. This conservative outlook stems from concerns over rising costs for raw materials like aluminum and fuel, as well as the potential impact of a more aggressive promotional strategy. Investors may interpret this as a warning of potential margin pressure in the near future.
CELH Estimates: More Pain Ahead?
Reflecting the negative sentiment around Celsius Holdings, the Zacks Consensus Estimate for EPS has seen downward revisions. Over the past seven days, analysts have lowered their estimates for both the current quarter and fiscal year by 58.3% and 15% to 10 cents per share and 85 cents, respectively. The consensus mark for the next fiscal year has also dived 13.1% to $1.06 in the same time span. This downward adjustment reflects a negative sentiment among analysts and suggests potential challenges in achieving projected profitability.
Image Source: Zacks Investment Research
Can Growth Initiatives Reverse CELH’s Decline?
Celsius Holdings is doubling down on strategic efforts aimed at driving growth and recapturing lost market share. The company continues to invest heavily in innovation, branding and marketing, with a clear focus on bolstering its competitive edge. By consistently launching new flavors and product variations, Celsius is aligning itself with changing consumer preferences, positioning itself to regain ground in a crowded marketplace.
One key advantage for Celsius is its presence across major retail channels. The company has successfully secured shelf space in prominent retail chains, convenience stores and e-commerce platforms, broadening its market access. Partnerships with industry heavyweights like Walmart, Target (TGT - Free Report) and Amazon have been instrumental in enhancing its visibility and reach.
Celsius Holdings is also actively working to increase its footprint in the energy drink sector. The company’s strategy to diversify its product range and enter new markets showcases a proactive approach to growing its consumer base. This diversification could provide new revenue streams and help reduce its dependency on the North American market.
These strategies aim to give Celsius Holdings the resources it needs to tackle its current challenges and take advantage of future opportunities in the competitive energy drink market.
Navigating CELH: Investors’ Roadmap
While Celsius Holdings is committed to growth through strategic initiatives, recent performance and valuation metrics raise serious concerns. The combination of decelerating revenue growth, shrinking market share, reliance on a single distribution partner, rising raw material costs and downward EPS revisions all point to potential financial pressures. With a high valuation, operational challenges and industry headwinds, Celsius Holdings appears risky in the near term. Without a clear catalyst to reverse its recent struggles, the stock could face further downside, and investors may want to approach with caution.
Celsius Holdings currently carries a Zacks Rank #5 (Strong Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.