Why Celsius Holdings stock is on a downward trend after rising 1,400% last year

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The company has performed well, but there are some limitations lurking in the background.

Beverage manufacturer Celsius Holdings (NASDAQ: CELH) recorded a price increase of over 2,000% through early 2021. This resulted in a surge in the popularity of energy drinks from $ 3.22 in mid-March last year to over $ 69 per share, which peaked in mid-January. Now, however, it’s only 1,400% higher than a year ago – still a big jump, but cooled significantly from its highs.

The slide continued today a few days after its last quarterly report. Let’s take a look at why it’s not working and where it’s likely going from here.

A look at Celsius’ share performance


Source: Getty Images

Celsius Holdings opens up the area of ​​healthy living and produces its beverages from “healthy ingredients”. It appears to be a contemporary fitness and energy drinks company. L-citrulline, caffeine-rich green tea extract for an energy boost, and formulas free of GMOs, aspartame, preservatives, and artificial ingredients, cater to the preferences of millennials and the rising Gen Z cohort for healthier beverages or supplements.

While still a pipsqueak next to category giants like Monster drink (NASDAQ: MNST), Celsius is rapidly expanding its market share in what a brave outsider would expect. A quick look at the numbers shows an upward trend for Celsius’ position in the overall market:

dateMarket share in energy drinks
20180.0% (too small to be measurable)
20190.2%
Q3 20200.7%
Q4 20201.0%

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

CompaniesQ3 Amazon market shareQ4 Amazon market share
monster31.2%34.2%
Red Bull15.8%14.7%
Celsius13.9%14.5%

Some other metrics from Celsius’ March 11th report on fourth quarter and full year 2020 results include:

  • Revenue increased 48% year over year in the fourth quarter and a total of 74% in fiscal 2020.
  • The company posted net income of $ 1.7 million in the fourth quarter of 2020 compared to a net loss of $ 1.2 million in the fourth quarter of 2019.
  • Domestic sales increased by 66% and international sales by 3%.
  • Sales in the Energy Drinks category at Amazon increased by 224.8% compared to the previous year.

CELH is slipping from its peak

As the first quarter of 2021 progressed, the Celsius Holdings share price fell steadily. The stock is down 3.4% today. The latest earnings report clearly has not improved investor opinion of the company as the share decline continues.

Several factors may be at the center of the Celsius dip from January highs. One of them is that despite all of the sales growth and explosive sales growth, net income actually fell between 2019 and 2020. The company’s earnings per share (EPS) fell short of the consensus on Wall Street. More importantly, however, net income fell from $ 10 million in 2019 to $ 8.5 million in 2020.

Additionally, Celsius seems likely to be overvalued to investors. Even after the recent declines, it is still trading at 27x sales and 410x net earnings. The growth has continued unabated, but has not kept pace with the immense profits the company generated from summer 2020 to January 2021.

What does the future hold for Celsius’ stocks?

Celsius Holdings appears to be a well-run company with a desirable product that is 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 expected to grow to $ 19.2 billion by 2024, a further 37.1% increase. Celsius’s healthy formulas also align with the preferences of younger generations who are now buying fitness and energy drinks.

However, it seems that investor exuberance has outperformed actual performance that Celsius or any company in its position could rationally deliver, regardless of how well it accomplishes its goals. Some analysts believe that the price of the stock should actually be in the $ 23-25 ​​range, and with a continued correction, they might be right. At this point, it seems better to wait than buy into a stock that may continue to slide for weeks or months.

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