Why Celsius Holdings Stock is On a Downward Slide After Gaining 1,400% in the Past Year

The company has been performing well but a few caveats lurk in the background.

Beverage maker Celsius Holdings (NASDAQ: CELH) saw its stock gain over 2,000% by early 2021, riding the powerful groundswell of energy drink popularity from $3.22 in mid-March last year to over $69 a share at its mid-January peak. Now, however, it’s only up 1,400% from a year ago – still a big leap, but clearly cooling off from its highs.

The slide continued today a few days after its most recent quarterly report. Let’s take a look at why it’s down and where it’s likely to go from here.

A Look at Celsius’ Stock Performance

Tapping into the healthy living sector, and making its drinks from “healthy ingredients,” Celsius Holdings appears to be a fitness and energy beverage company in tune with the times. L-citrulline, caffeine-rich green tea extract for an energy jolt, and formulas free from GMOs, aspartame, preservatives, and artificial ingredients are in line with Millennials’ and the rising Gen Z cohort’s preferences for healthier drinks or supplements.

While still a pipsqueak beside category giants like Monster Beverage (NASDAQ: MNST), Celsius is growing its market share rapidly in the way a plucky underdog might be expected to. A quick look at the figures shows an upward trajectory for Celsius’ position in the overall market:

Date Market Share in Energy Drinks
2018 0.0% (too small to be measurable)
2019 0.2%
Q3 2020 0.7%
Q4 2020 1.0%

Celsius Holdings is aggressively pushing distribution and has become the third most purchased energy drink brand on Amazon (NASDAQ: AMZN) after Monster and Red Bull. In terms of Amazon sales, in fact, Celsius is close to overtaking Red Bull, both through its own sales growth and a slump in Red Bull’s success:

Company Q3 Amazon Market Share Q4 Amazon Market Share
Monster 31.2% 34.2%
Red Bull 15.8% 14.7%
Celsius 13.9% 14.5%

Some other metrics from Celsius’ March 11 report on Q4 and full-year 2020 results include:

  • Revenue rose 48% year over year for Q4, and 74% for fiscal 2020 overall.
  • The company posted a Q4 2020 $1.7 million net profit versus a Q4 2019 $1.2 million net loss.
  • Domestic revenue rose 66% and international revenue 3%.
  • Energy drink category sales on Amazon grew 224.8% year over year.

CELH Slides From its Peak

As the first quarter of 2021 continues, Celsius Holdings has seen its share value decline steadily, with the stock down 3.4% today. Its latest earnings report clearly did not improve investors’ opinion of the company since the stock decline continues.

Several factors may lie at the heart of Celsius’ slump from its January highs. One of these is that full-year net income actually fell between 2019 and 2020, despite all of the top-line gains and explosive sales growth. The company’s earnings per share (EPS) missed Wall Street consensus, but more significantly, net income fell from $10 million in 2019 to $8.5 million in 2020.

Additionally, Celsius likely appears overvalued to investors. Even after recent declines it still trades for 27X sales and 410X net income. While growth has continued unabated, it has not kept pace with the immense gains the company made from summer 2020 to January 2021.

What Does the Future Hold for Celsius’ Stock?

Celsius Holdings appears to be a well-run company with a desirable product, in the right place at the right time. It is positioned in the energy drink market, which grew 50.8% between 2014 and 2020, and is forecast to climb to $19.2 billion by 2024, another 37.1% rise. Celsius’ healthy formulas are also in sync with the preferences of younger generations now buying fitness and energy drinks.

However, it appears investor exuberance may have outpaced any actual performance Celsius, or any company in its position, could rationally deliver, no matter how good its execution on its objectives. Some analysts think the stock should actually be priced in the $23 to $25 range, and with a persistent correction underway, they may be right. At this point, it seems better to wait and see rather than buying into a stock that may continue to slide for weeks or months to come.

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