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Celsius Holdings Plunges 52% in 6 Months: Time to Hold Tight or Exit?
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Celsius Holdings, Inc. (CELH - Free Report) has been going through quite a rough patch, with its shares plunging a substantial 52% in the past six months. Factors like decelerating sales growth and dwindling market share have led this functional energy drinks and liquid supplements company to underperform the industry, broader Zacks Consumer Staples sector as well as the S&P 500’s respective growth of 2.6%, 9.2% and 15%.
CELH Price Performance Vs Industry, S&P 500 & Sector
Image Source: Zacks Investment Research
At Monday's close, CELH was priced at $34.82, marking a steep 65% decline from its 52-week high of $99.62. The stock is currently trading below both its 50-day and 200-day simple moving averages, indicating a bearish outlook among investors.
Despite this sharp decline, CELH’s stock is trading at a premium to the industry and broader market. With a forward 12-month P/E ratio of 36.21, significantly higher than the industry average of 16.31 and the S&P 500’s 22.08, the valuation reflects historically high investor expectations for the company's future growth.
However, the recent stock performance raises serious questions about whether these elevated expectations remain justified. Celsius Holdings’ Value Score of D further reinforces concerns around its overvaluation, signaling that its current price may not align with underlying fundamentals.
Celsius Holdings remains a solid player in the energy drink segment, but it faces broader industry headwinds. Consumer fatigue with energy drinks, a shift toward more health-conscious products, and reduced discretionary spending are putting pressure on the industry. With competition from both new entrants and established leaders like Monster Beverage (MNST - Free Report) and Red Bull intensifying, Celsius Holdings is finding it harder to stand out.
One of the company’s key vulnerabilities is its heavy dependence on distribution partnerships. While its alliance with PepsiCo (PEP - Free Report) has significantly fueled growth, reliance on a single major partner carries risks. PepsiCo's ongoing efforts to streamline inventory management have already contributed to slower sales growth for CELH. As PepsiCo continues to focus on operational efficiencies and negotiating better terms, Celsius Holdings may struggle to sustain its growth if it remains overly reliant on this partnership.
Celsius Holdings also faces limitations in its global reach, with only 5% of its revenue coming from outside North America. This limited international expansion makes the company heavily reliant on the U.S. market, leaving it vulnerable to heightened risks if domestic growth slows or competition increases.
These obstacles could be the reason why despite reporting a 23.4% revenue increase in the second quarter of 2024 — a strong result in absolute terms — Celsius Holdings fell short of the elevated expectations set by its previous rapid growth. During the four-week period that ended on July 14, 2024, the company captured an 11% share of the MULOC category, a 50-basis point drop from the prior quarter. This dip in market share has sparked concerns about the company’s ability to maintain its competitive position in an increasingly crowded market.
Additionally, margins are becoming a growing concern. While Celsius Holdings improved its gross margins in the second quarter, the company has issued a more cautious outlook for the rest of the year. Rising raw material costs, particularly for aluminum and fuel, coupled with a potentially more aggressive promotional strategy, could put pressure on margins. Investors may interpret this cautious guidance as a sign of potential margin compression in the near term.
CELH Estimates: Are Tough Times on the Horizon?
Amid growing concerns surrounding Celsius Holdings, the Zacks Consensus Estimate for earnings per share has experienced downward revisions. Over the past 30 days, analysts have reduced their projections for the current quarter, the full fiscal year and the next fiscal year. These revisions point to a shift in sentiment, signaling potential hurdles ahead in meeting profitability targets and highlighting the cautious outlook analysts now hold for the company.
Image Source: Zacks Investment Research
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
Can Growth Initiatives Steer CELH Back on Track?
Celsius Holdings is ramping up its strategic initiatives to reverse its recent decline and reclaim lost market share. The company is making significant investments in innovation, branding, and marketing, with a strong focus on strengthening its competitive position. By regularly introducing new flavors and product variations, Celsius Holdings aims to stay aligned with shifting consumer preferences, positioning itself to regain momentum in a highly competitive landscape.
One of Celsius Holdings’ key strengths lies in its widespread presence across major retail channels. The company has successfully secured shelf space in leading retail chains, convenience stores, and e-commerce platforms, expanding its market reach. Strategic partnerships with giants like Walmart, Target (TGT - Free Report) and Amazon have been crucial in boosting Celsius Holdings' visibility and enhancing its accessibility to a broader customer base.
Along with these initiatives, efforts to expand its footprint in the energy drink sector by entering new markets, are designed to equip Celsius Holdings with the tools necessary to address current challenges while seizing future opportunities in the increasingly competitive energy drink industry.
Celsius Holdings at a Crossroad: What Investors Should Know?
Celsius Holdings finds itself at a critical juncture. While the company has demonstrated strong revenue gains, the deceleration in market share and increasing competition signal potential challenges ahead. Its reliance on PepsiCo, slow international expansion, and margin pressures suggest that the road forward may be more difficult than anticipated.
The bearish sentiment reflected in the stock’s recent performance, as well as negative estimate revisions also add to this cautious outlook, suggesting that without a turnaround in core business fundamentals, CELH may continue to face downward pressure. These factors, along with a lofty valuation make Celsius Holdings a risky bet at present. The company currently carries a Zacks Rank #4 (Sell).
Image: Bigstock
Celsius Holdings Plunges 52% in 6 Months: Time to Hold Tight or Exit?
Celsius Holdings, Inc. (CELH - Free Report) has been going through quite a rough patch, with its shares plunging a substantial 52% in the past six months. Factors like decelerating sales growth and dwindling market share have led this functional energy drinks and liquid supplements company to underperform the industry, broader Zacks Consumer Staples sector as well as the S&P 500’s respective growth of 2.6%, 9.2% and 15%.
CELH Price Performance Vs Industry, S&P 500 & Sector
Image Source: Zacks Investment Research
At Monday's close, CELH was priced at $34.82, marking a steep 65% decline from its 52-week high of $99.62. The stock is currently trading below both its 50-day and 200-day simple moving averages, indicating a bearish outlook among investors.
Despite this sharp decline, CELH’s stock is trading at a premium to the industry and broader market. With a forward 12-month P/E ratio of 36.21, significantly higher than the industry average of 16.31 and the S&P 500’s 22.08, the valuation reflects historically high investor expectations for the company's future growth.
However, the recent stock performance raises serious questions about whether these elevated expectations remain justified. Celsius Holdings’ Value Score of D further reinforces concerns around its overvaluation, signaling that its current price may not align with underlying fundamentals.
Image Source: Zacks Investment Research
Inside Celsius Holdings’ Struggles: What’s Going Wrong?
Celsius Holdings remains a solid player in the energy drink segment, but it faces broader industry headwinds. Consumer fatigue with energy drinks, a shift toward more health-conscious products, and reduced discretionary spending are putting pressure on the industry. With competition from both new entrants and established leaders like Monster Beverage (MNST - Free Report) and Red Bull intensifying, Celsius Holdings is finding it harder to stand out.
One of the company’s key vulnerabilities is its heavy dependence on distribution partnerships. While its alliance with PepsiCo (PEP - Free Report) has significantly fueled growth, reliance on a single major partner carries risks. PepsiCo's ongoing efforts to streamline inventory management have already contributed to slower sales growth for CELH. As PepsiCo continues to focus on operational efficiencies and negotiating better terms, Celsius Holdings may struggle to sustain its growth if it remains overly reliant on this partnership.
Celsius Holdings also faces limitations in its global reach, with only 5% of its revenue coming from outside North America. This limited international expansion makes the company heavily reliant on the U.S. market, leaving it vulnerable to heightened risks if domestic growth slows or competition increases.
These obstacles could be the reason why despite reporting a 23.4% revenue increase in the second quarter of 2024 — a strong result in absolute terms — Celsius Holdings fell short of the elevated expectations set by its previous rapid growth. During the four-week period that ended on July 14, 2024, the company captured an 11% share of the MULOC category, a 50-basis point drop from the prior quarter. This dip in market share has sparked concerns about the company’s ability to maintain its competitive position in an increasingly crowded market.
Additionally, margins are becoming a growing concern. While Celsius Holdings improved its gross margins in the second quarter, the company has issued a more cautious outlook for the rest of the year. Rising raw material costs, particularly for aluminum and fuel, coupled with a potentially more aggressive promotional strategy, could put pressure on margins. Investors may interpret this cautious guidance as a sign of potential margin compression in the near term.
CELH Estimates: Are Tough Times on the Horizon?
Amid growing concerns surrounding Celsius Holdings, the Zacks Consensus Estimate for earnings per share has experienced downward revisions. Over the past 30 days, analysts have reduced their projections for the current quarter, the full fiscal year and the next fiscal year. These revisions point to a shift in sentiment, signaling potential hurdles ahead in meeting profitability targets and highlighting the cautious outlook analysts now hold for the company.
Image Source: Zacks Investment Research
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
Can Growth Initiatives Steer CELH Back on Track?
Celsius Holdings is ramping up its strategic initiatives to reverse its recent decline and reclaim lost market share. The company is making significant investments in innovation, branding, and marketing, with a strong focus on strengthening its competitive position. By regularly introducing new flavors and product variations, Celsius Holdings aims to stay aligned with shifting consumer preferences, positioning itself to regain momentum in a highly competitive landscape.
One of Celsius Holdings’ key strengths lies in its widespread presence across major retail channels. The company has successfully secured shelf space in leading retail chains, convenience stores, and e-commerce platforms, expanding its market reach. Strategic partnerships with giants like Walmart, Target (TGT - Free Report) and Amazon have been crucial in boosting Celsius Holdings' visibility and enhancing its accessibility to a broader customer base.
Along with these initiatives, efforts to expand its footprint in the energy drink sector by entering new markets, are designed to equip Celsius Holdings with the tools necessary to address current challenges while seizing future opportunities in the increasingly competitive energy drink industry.
Celsius Holdings at a Crossroad: What Investors Should Know?
Celsius Holdings finds itself at a critical juncture. While the company has demonstrated strong revenue gains, the deceleration in market share and increasing competition signal potential challenges ahead. Its reliance on PepsiCo, slow international expansion, and margin pressures suggest that the road forward may be more difficult than anticipated.
The bearish sentiment reflected in the stock’s recent performance, as well as negative estimate revisions also add to this cautious outlook, suggesting that without a turnaround in core business fundamentals, CELH may continue to face downward pressure. These factors, along with a lofty valuation make Celsius Holdings a risky bet at present. The company currently carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.