Title: Will Celsius Recover in 2025? An In-Depth Look
Celsius Sparkler's Struggle sees a hiccup with their metabolism-boosting beverage. Despite the unique formula, the stock of Celsius Holdings (CELH 1.31%) has failed to ignite, plummeting 45% in 2024 and 70% from its all-time peak in March. Investors, once drawn to the company's phenomenal revenue growth, are now turning skeptical as reported revenue turned negative.
Yet, some analysts perceive a spark and see potential in the downturned stock chart. Last week, Needham initiated coverage with a buy rating, adding Celsius to their Conviction List, and most recently, Andrea Teixeira from JPMorgan has initiated coverage with an overweight rating. Bold targets of $37 and $38, respectively, hint at promising upside despite the stock's frosty step back to $68.
A Rising Star's FallCelsius was once a market sensation, boasting double-digit revenue surges year after year. The functional beverage company expanded from its original strongholds at gyms and health stores to a widespread presence across supermarkets, drugstores, and convenience stores. This growth strategy propelled the revenue tin from $11 million in 2013 to an impressive $1.3 billion in 2024.
Pepsi's Quench for GrowthPepsiCo, the famous beverage giant, took notice of Celsius' momentum. Seeking to quench its own thirst for expansion, PepsiCo struck a deal to secure minority stakes and distribution rights, ensuring a broader presence in untapped markets such as hotels, restaurants, and casinos.
The shelved partnership aided Celsius' overseas push, but also restricted its rapid growth in the domestic market which started showing signs of fatigue as consumer passion for energy drinks cooled down. The first alarm rang when Q1 sales surged 37% year-over-year, far from analyst predictions, due to an unexplained inventory management dip at Pepsi. While retail sales moved briskly, the company registered a 23% revenue growth in Q2, followed by a 31% revenue decline in Q3 almost entirely due to Pepsi’s reduced order volume.
The New Year's ResolutionDespite the disappointing Q3, some analysts see this as an opportunity to buy low, banking on Celsius reaching its $35 $40 price target by the end of 2025. This optimism is supported by its market share gains, ongoing international expansion, and improved private label distribution.
An inventory solution, ideally eliminating stock shortages at retailers and boosting consumer access to Celsius, could help reverse the recent downward spiral. If Celsius can emulate its past success and rediscover the magic, investors may once again welcome this metabolism-boosting beverage with open arms and warm wallets.
Enrichment Insights:
- Severe revenue decline: Revenue for Celsius Holdings fell by 30.93% in Q3 of 2024, marking a significant setback for the company.
- Stock decline: The Celsius Holdings stock price decreased by 51.7% in 2024 and 70% from its all-time high in March due to revenue decline and inventory management issues.
- Analyst optimism: Positive predictions from analysts like JPMorgan and Needham suggest potential growth and investment opportunities with a bullish price target of $35-$40.
- Inventory Management Issues: The decline in revenue was partly caused by inventory management challenges with the company's largest customer, PepsiCo, which reduced order volume.
- International expansion: Celsius Holdings continues to grow through international expansion, entering six new countries in 2024, with a goal to develop a strong global presence.
- Future growth and improved margins: Analysts expect at least a single-digit revenue growth in Q4 2024 and FY 2025, with improved gross margins, paving the way for long-term growth.
[1] https://finviz.com/screener.ashx?v=111&f=hgocap%3D500&ft=3%2C4&st=%7B%22symbol%22%3A%22CELH%22%2C%22date%22%3A%222023-11-30%22%7D&sf=3
[2] https://finance.yahoo.com/quote/CELH#yfi_dev
[3] https://www.marketwatch.com/story/celsius-holidays-up-22percent-after-debut-on-nasdaq-2019-3-29
[4] https://www.mergernews.com/article/needham-initiates-coverage-of-celsius-holdings-ce21-with-buy-rating
[5] https://www.msn.com/en-us/money/companies/celsius-ceo-says-this-year-is-marking-a-transition-but-growth-isnt-over/ar-BB1rmrba
Although the financial struggles of Celsius Holdings have led to a significant decrease in their stock price and negative revenue growth, some analysts still view this as an opportunity for investors to purchase shares at a discount with the expectation of reaching their price targets of $35-$40 by the end of 2025. Despite the challenges with managing inventory, Celsius continues to forge ahead with international expansion, aiming to establish a strong global presence.
With the development of an effective inventory solution to eliminate stock shortages and boost consumer access to the metabolism-boosting beverage, Celsius may have the potential to recapture its past success and regain the trust of investors, ultimately driving the price of Celsius Holdings shares upward in the finance and investing world.
