Celsius Holdings, Inc. is a worldwide company that has a diversified brand of energy drinks and protein bars. The company’s products claim to give several health benefits. The products come in several pleasant sparkling and non-carbonated flavors, and in powder stick packets that can be mixed with water. It has no aspartame, no high fructose, and no artificial flavors or colors. They invested heavily in R&D and the products are backed by patents. Despite the huge history behind the company, its stock is dropping constantly. So, why is CELH’s stock dropping? Well, let’s find out.
Overview of Celsius Holdings in Market
The company started with energy drinks and they claimed it’ll enhance your performance during workouts, they also own a company called FAST bar which is a supplement for people who are trying intermittent fasting or other types of calorie restriction diets. The company was founded in 2004 and its shares got listed in 2017. In the beginning, the share price was $4.04, fast forward to 2022, and the share price became $107.
In the year 2022, the company achieved new heights of growth and continued to dominate in the sports energy drink category. In the third quarter of 2022, the company showed a revenue of $188 million, up by 98% from quarter 3 in 2021. The domestic margin was doubled. The company has always worked on its distribution and it facilitates its customers with strong distribution channels across America.
Its reach and product availability has allowed the company to build a reputable brand, it is offering healthier, functional energy drinks. Much of its success was a factor by the pandemic that hit us all. People became more concerned about their physical health and an uptick in health and wellness trends contributed a lot to the sales growth of the company.
In 2022, PepsiCo made a deal with CELH, this increased the investor’s confidence and the deal has proved to be extremely beneficial to CELH as it opened the doors to a larger and more established distribution network. The PepsiCo agreement provided the company with additional expansion, in just quarter 3 of 2022, the company had more than 174,000 store count. As of now, Pepsi owns 8.5% shares in CELH.
Monster, a famous energy drink entered into a similar arrangement with Coca-Cola and this benefited the company immensely. So, it is too early to tell just how fruitful the deal will be for Celsius.
Finding Its Place in an $85 Billion Market:
According to a published analysis, the energy drink market is supposedly going to reach $85 billion by 2025. In the year 2022, the global market value was $69 billion, if the market cap is going to reach those heights that mean several players in the game will make big moves.
Celsius is a brand that is appealing to people as it promotes the message of a healthy lifestyle by offering products that bring several health benefits, the main driver behind its growth seems to be the management’s work ethic and the deal with PepsiCo has also opened the gates to enhanced market share momentum.
Monster and Red Bull still seem to hold the major share of the market for now, but by 2025 it is expected that 8% to 9% of the market share could be captured by Celsius.
Second-largest Seller in Amazon
Their amazon sales hit an all-time high in the third quarter of 2022, a whopping $42.9 million. Amazon has proved to be extremely fertile for Celsius as it accounted for about 9% of the total sales for the first nine months of 2022. Certain analysts predict that the growth through this platform will continue to rise and will triple to $978 million by 2023 as compared to just $314 million in 2021.
The company came with a huge surprise when it partnered up with the Professional Fighters League ( a mixed martial arts organization). The agreement saw an upwards projection of 11% in shares. Celsius is always out to look for partnerships that will prove to be beneficial, joining hands with major sporting events will boost their sales and share value.
Is Celsuis Holdings Worthy Of Investment?
Celsius is a major brand now, which can’t be denied but even though the company seems to be growing, only short traders are being attracted, and investors who have held onto the stock for the past three years have been presented with great returns. The company’s short interest has been growing gradually. The company’s EPS rating is 25 which is considered low.
The company’s stock value was $104.4 by the end of 2022, by the time this article is being published the stock’s value is $83.01, although this seems to be a huge decrease, keep in mind that beverage companies don’t do that well during Q4, the sales usually suffer during that time. The stock gained too much momentum in a short period and could face some major problems in the coming period. The stock is too expensive for a common person to invest in, it also contains a high EV/EBITDA of 102.86x and a P/S of 12.54x.
The company has a history of not paying dividends and lacks a track record of success and provides only modest downside protection if the sales outlook unexpectedly changes and investor sentiment turns unfavorable. Long-term investors might have to stay away from this company as it doesn’t seem a good investment and investors who buy at these levels in hopes of future returns might be disappointed.
Despite the loss in stock’s value, investors who already have their money in the game shouldn’t be disappointed, summer is just around the corner and that is when beverage companies flourish the most. The stock is not for the risk-averse but contains long-term potential. The recent drop in value was due to Li ka Shing cutting ties with the company and a major shareholder selling their stock, it might take some weeks for the stock to get stable.