Recommendation: Buy
| Entry Date | Symbol | Recommendation | Entry Price (USD) | Target 1 (USD) | Target 2 (USD) | Holding Duration | Potential Upside* |
|---|---|---|---|---|---|---|---|
| 13 Dec, 24 | CELH | Buy | USD 31.99 | USD 36.0 | USD 41.5 | 11 days | 29.7% |
*Potential Upside (%) indicates the expected percentage increase from the Entry Price to the Target 2 Price.
Data Powered by EOD Historical Data (“EODHD”).
Celsius Holdings, Inc. develops, processes, markets, distributes, and sells functional energy drinks and liquid supplements in the United States, Australia, New Zealand, Canadian, European, Middle Eastern, Asia-Pacific, and internationally. The company offers CELSIUS, a fitness drink or supplement designed to accelerate metabolism and burn body fat; various flavors and carbonated and non-carbonated functional energy drinks under the CELSIUS Originals and Vibe name, as well as functional energy drink under the CELSIUS Essentials and CELSIUS On-the-Go Powder names; and CELSIUS ready-to drink products. It distributes its products through direct-to-store delivery, distributors, supermarkets, convenience stores, drug stores, nutritional stores, and mass merchants, as well as health clubs, gyms, the military, and e-commerce websites. The company was formerly known as Vector Ventures, Inc. and changed its name to Celsius Holdings, Inc. in January 2007. Celsius Holdings, Inc. was founded in 2004 and is headquartered in Boca Raton, Florida.
Amazon Sales Growth: Sales to Amazon grew by 21% year-over-year, totaling approximately $27.0 million for the quarter ended September 30, 2024.
International Revenue Growth: International sales increased by 37% year-over-year in Q3 2024, reaching $18.6 million compared to $13.6 million in Q3 2023.
Net Income Decline: Net income for Q3 2024 dropped by 92%, falling from $83.9 million in Q3 2023 to $6.4 million in Q3 2024.
Revenue Decline in North America: North American revenue decreased by 33% year-over-year in Q3 2024, falling from $371.2 million in Q3 2023 to $247.1 million in Q3 2024.
Key investment risks for Celsius Holdings, Inc. include reliance on a few large distributors for a significant portion of revenue, potential volatility in gross margins due to supply chain optimization and promotional allowances, and the challenges of maintaining profitability amid increasing competition in the energy drink market.
| Entry Price | Support* | Target 1 | Target 2 |
|---|---|---|---|
| 31.99 | 27.0 | 36.0 | 41.5 |
Data Source: REFINITIV, Analysis: StockNextt
*Support can be considered as an indicative stop-loss, and if prices move below that level on closing basis individuals may evaluate exiting the position depending on their risk appetite, previous holdings, and other factors considered. The support and resistance levels may need to be re-evaluated within 4-6 weeks’ time frame depending on the stock price movements from the date of recommendation on the stock.
Quarterly Results Impacted by Distributor Optimization
Celsius Holdings, Inc. reported third-quarter 2024 financial results reflecting the effects of a significant supply chain optimization initiative by its largest distributor. Revenue for the quarter decreased by 31% year-over-year to $265.7 million, driven by a $123.9 million reduction in distributor orders. However, consumer retail sales in the U.S. grew by 7.1% in the same period, indicating strong end-market demand despite supply chain challenges.
International Sales and Revenue Growth
International sales surged by 37% to $18.6 million in Q3 2024 compared to $13.6 million in the prior-year quarter. Year-to-date international revenue also demonstrated robust growth, increasing 36% to $54.4 million. These gains reflect the company’s ongoing efforts to expand its presence in markets outside North America.
Margin Compression and Earnings Decline
Gross margin for the third quarter fell to 46.0%, down from 50.4% in Q3 2023, due to promotional allowances and inventory adjustments by its largest distributor. Consequently, net income for Q3 2024 declined sharply to $6.4 million, a 92% drop compared to the prior-year period, while diluted earnings per share fell to $(0.00) from $0.30.
Year-to-Date Financial Performance
Despite quarterly setbacks, year-to-date revenue as of September 30, 2024, increased by 5% to $1.02 billion, supported by a 10% rise in gross profit to $513.5 million. Gross profit margins for the year improved to 50.2% from 48.1% in the same period of 2023, reflecting operational efficiencies in outbound freight and material costs.
Strategic Acquisitions and Innovation
In November 2024, Celsius acquired Big Beverages Contract Manufacturing, a move aimed at enhancing its innovation capabilities and supply chain control. This acquisition includes a 170,000-square-foot facility expected to improve production flexibility and scalability. The company also introduced new flavors in its CELSIUS ESSENTIALS line and announced plans for additional flavor launches in 2025.
E-commerce and Club Channel Performance
Celsius’ e-commerce sales demonstrated strong growth, with sales on Amazon increasing 21% year-over-year to $27 million in Q3 2024. Meanwhile, total club channel sales declined by 4% to $60.5 million, primarily due to timing issues related to promotions and product launches at Sam’s Club and BJ’s, offset partially by a 15% increase in Costco sales.
Expanding International Footprint
The company achieved promising results in international markets, with sales in Canada, the UK, and Ireland surpassing initial expectations. Sales in Australia and New Zealand began in Q3 2024, supported by partnerships with major national retailers, further extending Celsius’ global reach.
Considering stable revenues, healthy guidance, recent key business, financial updates, current trading levels, and key business risks, a ‘Buy’ recommendation has been given on the Celsius Holdings, Inc (NASDAQ: CELH) at the closing price of USD 31.99, as on December 12, 2024.
Data Powered by EOD Historical Data (“EODHD”).
Sector: Consumer Defensive Industry: Beverages - Non-Alcoholic
| Company | Change (USD) | Price (USD) | Trailing PE (x) | Forward PE (x) | Price Sales TTM (x) | Price to Book Value (x) | Enterprise Value to Revenue (x) | Enterprise Value to EBITDA (x) |
|---|---|---|---|---|---|---|---|---|
| CELH Celsius Holdings Inc |
0.54 1.52% | 36.16 | 37.82 | 30.67 | 4.67 | 15.11 | 4.61 | 26.45 |
| KO The Coca-Cola Company |
0.05 0.08% | 71.67 | 23.61 | 20.58 | 5.53 | 9.46 | 6.08 | 17.61 |
| PEP PepsiCo Inc |
-0.68 0.45% | 149.26 | 26.80 | 20.62 | 2.53 | 12.49 | 2.90 | 16.87 |
| NNFSF Nongfu Spring Co. Ltd |
- -% | 4.57 | 47.42 | 40.49 | 1.74 | 20.38 | 1.67 | 4.05 |
| MNST Monster Beverage Corp |
0.30 0.51% | 58.82 | 32.69 | 30.03 | 7.81 | 6.68 | 7.32 | 26.73 |
Data Powered by EOD Historical Data (“EODHD”).
Related Risks: This report may be looked at from high-risk perspective and recommendations are provided are for a short duration. Recommendations provided in this report are solely based on technical parameters, and the fundamental performance of the stocks has not been considered in the decision-making process. Other factors which could impact the stock prices include market risks, regulatory risks, interest rates risks, currency risks, social and political instability risks etc.
Note 1: Past performance is not a reliable indicator of future performance.
Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is December 12, 2024. The reference data in this report has been partly sourced from REFINITIV.
Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.
Target: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Target 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Target 2 may act as the crucial resistance level for the stock.
Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.
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