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Celsius Holdings, Inc. is a health and sports drink company founded in April 2004 and based in Boca Raton, FL, USA. The company is traded on the NASDAQ under the ticker CELH. It made a loss of $2.63 per share on revenues of $654 million in 2002. Analysts expect it to make a profit of $1.32 per share on revenues of $1.1 billion in 2023. Its peer group includes Monster Beverage (MNST), Molson Coors (TAP), Coca-Cola (COKE), and National Beverage (FIZZ).
Celsius’s stock hit an all-time high of $140.39 in June after beating first-quarter earnings estimates by 95%. It reported a Q1 EPS of 44 cents. Its stock has risen over 100% (its low was $52.11 in June 2022) in the last twelve months.
Celsius’s stock has an average rating of Buy from equity research analysts and price targets ranging from $122 to $160, according to Capital IQ. If it hits the high end of that range this year, it would represent a 16% gain for shareholders.
In the first quarter, Celsius reported its all-time quarterly record revenue of $260 million and over $34 million in net income, which it attributed to its products’ expanded availability and increased consumer awareness of them.
Zacks analysts attribute the brand’s success to its targeted marketing strategies, extensive distribution network, and strategic partnerships with athletes and fitness influencers.
Over the last 10 years, CELH stock is up 51,800%, or 85% annualized, according to Zacks.
Table of Contents
A Brief Outlook of Celsius
Celsius Fundamental Data
Celsius Stock Forecast 2023
Celsius has strong support from the equity analyst community. It currently has six “outperform” ratings and five Buy ratings, with no Hold or Sell ratings. This is despite its currently lofty valuation. Its stock’s TTM price to sales ratio of 13.8x is far above the industry average of 4.9x and significantly above that of Monster Beverage, another high-growth sports drink manufacturer, which trades at 9.59x.
Nonetheless, on June 2, UBS boosted its price target to $160 from $130. As noted above, Celsius stock has an average rating of Buy and price targets ranging from $122 to $160, according to Capital IQ.
Fundamentals
Analyst bullishness could be warranted due to Celsius’s strong fundamentals, despite the stock’s currently above-market price to sales ratio. In the last four years revenue has increased tenfold, from $75 million. Zacks analysts expect second-quarter sales to grow 75% YoY and 2023 sales to grow 68% YoY.
Zacks (which rates Celsius a Strong Buy) thinks earnings are on track for even greater growth. It recently revised its estimate of second-quarter earnings higher by 14.8% and expects them to grow 158% YoY, and it revised its estimate of 2023 earnings upward by 32.7%. It expects them to grow 154% YoY.
Not all analysts are equally bullish. Five surveyed by Refinitiv reported a range of earnings forecasts from $1.07 to $1.56 per share, with a mean forecast of $1.32. That forecast has come down by 13 cents in the month prior to June 2. Analysts forecast 2024 earnings in a range from $1.55 to $2.64 per share, with the mean of $2.23 up 2 cents.
To support these earnings forecasts, and the stock valuations they imply, requires an assumption that the non-alcohol sports and health-drink market continues to grow in size and in pricing power. This assumption needs to be tested because sales growth in the sector, while robust, is slowing.
Wedbush analysts wrote in May that the US energy drinks category posted dollar sales YoY growth of 13.1%, which reflected a 10 basis points deceleration relative to the prior four-week period. Dollar sales for the US sports drinks category were up 5.8%, a 12.8-point deceleration compared with the 18.6% growth seen in the prior four-week period. All the players in these categories will be affected if these decelerations turn out to be other than cyclical dips in an otherwise upward trend.
Even if the market growth decelerates slightly, Celsius looks to be in the pole position. Wedbush said that its dollar sales growth in the four weeks to May 20 was 144.5% (versus 13.1% for the category) and it secured a 390-basis-point gain of dollar share, which Wedbush analysts said was the highest level of market share capture for the company on record.
In terms of macro variables, the company has minimal debt, which it has pared significantly in recent years, so rising rates and the availability of bank financing are not serious issues for it. And, given its popularity, it has the pricing power to offset inflationary pressures, if the need arises.
Technicals
Current technical indicators for the stock are mostly positive. It remains 38.9% above an upwards sloping 200-day moving average, and a Comparative Relative Strength analysis shows that it is outperforming the S&P 500. Momentum and volume indicators are both in bullish territory. Volatility is higher than typical for this stock, with the Bollinger Bands wider than usual, but that is not unusual when shares are rising rapidly, as is the case with Celsius.
Risks
It appears that consensus analyst forecasts, company fundamentals, and stock technicals are all lined up in a way that should be positive for the Celsius share valuation in 2023. However, the company has had a negative net profit margin (income after taxes divided by sales x 100) since late 2021, and its current negative net profit margin is –19.58%, far in excess of its peer group. In fact, Monster, another sports and energy-drink biggie, has a positive net profit margin of 19.95%
Celsius has attributed this to investment in distribution, marketing, and other expansion-related issues, as well as rising input costs (in particular, aluminum used in cans). If this is so, taking a hit to profits for the sake of growth could be smart, but potential investors should keep a close eye on whether the net profit margin recovers in the coming quarters, and whether the company meets or beats analysts’ bullish earnings estimates.
Another risk is that, as noted above, the sports and energy-drink sector’s growth rate is slowing. This might be a short-term blip, but it is something investors should keep an eye on.
Mitigants
Hedging a Celsius position with puts is not cheap. The $135 strike, October 20 contract (the one expiring after the company’s Q2 earnings announcement in August) had a mid-market premium of about $15 on June 2. However, that was down nearly 11% from the previous day, perhaps in response to the news of UBS’s change in its price target for Celsius.
Given the difficulty determining an appropriate hedge ratio (the amount of your position you choose to hedge), and the cost of the options themselves, investors could avoid some headaches by simply employing stop-loss orders and/or trailing stops, which are free and, although not perfect, provide significant downside protection.
A Historical Look at Stock Price History of Celsius
Celsius Stock 2022
Celsius stock was volatile in 2022, but managed a strong showing nonetheless, rising nearly 80% over the course of the year to close at about $98. The company noted, in its annual report, that its results were affected by the COVID-19 Pandemic, which closed a lot of gyms and other facilities where sports drinks are sold, and by supply chain issues, which it was able to resolve.
Also in 2022, Pepsi purchased an 8.5% stake in Celsius in a deal that gave it distribution rights to Celsius’s products.
Celsius reported a net loss of $187 million on revenues of $654 million.
Celsius Stock 2021
Celsius’s stock was particularly volatile in 2021, even though the company reported respectable earnings and sales figures. Shares began the year around $58, peaked in November around $103, then fell to close the year around $54. These moves were largely the result of sentiment toward products affected by Covid-19 and by larger market and sector trends. The company’s earnings were up 110% YoY, and sales rose 140% to $314 million. Growth in North America was the main driver of the increased sales. Profit margins narrowed due to the rising costs of materials like aluminum.
Celsius Stock 2020
Celsius stock price rose over tenfold in 2020 to close the year at around $58. Its revenues ballooned due to strong growth in the North American market and via ecommerce. Sales rose 74% to $130.7 million. Earnings were up 98% to $61 million, due to sales but also some cost savings, promotional cutbacks, and favorable currency fluctuations.
Conclusion
Celsius has established itself as a significant player in the energy and sports-drink space, and despite concern over its net margins and recent history of (minor) EPS losses, it appears well positioned for further growth.
It is well-insulated from macroeconomic concerns. The company has boosted its revenues through growth, rather than price increases, meaning it is well-positioned to increase prices if inflation considerations demand it. It has minimal exposure to interest rates because it has almost no debt.
Celsius is in a successful growth phase, evidenced, among other things, by its distribution deal with Pepsi. Granted, its stock is trading at a lofty valuation, but that level could quickly become justified if the company continues to grow its revenue at the current pace, and its earnings catch up as marketing and distribution costs become less onerous.
FAQs
What is the consensus for Celsius stock performance this year?
The 11 analysts who cover the stock have either an “outperform” or a “buy” rating on Celsius. The highest price forecast comes from UBS, which recently raised the high end of its estimate to $160.
Celsius has to prove that it can boost its net margin, which is currently far in negative territory, if it is going to turn its impressive revenue growth into long-term value for its shareholders.
Is Celsius a fundamental or a technical play?
Arguably, both. It has had impressive revenue growth in recent years, and it has a nearly debt-free balance sheet. Technically, the stock, while volatile, has strong momentum and volume factors, and recently hit its all-time high. So a positive outlook for the share price could be based on either fundamental or technical factors.
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