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  • Writer's pictureRealFacts Editorial Team

Celsius Holdings (CELH) Drops 30%: Is It Time to Buy the Dip?


celsius drinks

Current Celsius Stock Performance


After experiencing a slow 17% decline last week, Celsius Holdings stock closed trading at $61.69 on June 12th, marking a 30% drop from its recent highs of $96.92 last month. This decline has brought the current P/E ratio just under 70x, which is expensive but less expensive when trading at the $90 a share level beforehand. Its forward P/E ratio is 52x, compared to the average forward P/E of 21x in the US Beverage industry, indicating the stock is still expensive, however this could be a good premium to pay given a historical return of 4,480.58%, over the last 5 years. However the question remains will this growth persist, and why such a dramatic correction?


Historical Volatility and Market Sentiment


Celsius shares have historically been volatile, with drops of 20% or more occurring roughly twice a year over the last five years, two of these spikes have occurred early this year, experiencing a dramatic drop and returning back and past previous levels. Now after this week down 29.14% for the month, we are seeing yet another drop. Despite this volatility, the stock has shown remarkable long-term growth, increasing by over 5,000% in the past five years before the correction this month.


The recent decline in stock price appears to be a market adjustment rather than a reflection of any fundamental problems within the company. Analysts note that the high valuation multiples are being recalibrated as the company's growth rate normalizes. From the chart below with total revenues and free cash flows growth looks to be slowing. Therefore we are likely to put this into account and not see as much previous triple-digit figures to a still impressive 30-50% range of yearly stock price gains. The market is now reassessing appropriate valuation multiples for the stock, leading to its current downward adjustment.


Growth and Revenue Projections For The Long Term


Celsius has been experiencing strong growth, driven by increased market share and expanding demand for energy drinks. However, recent channel checks suggest a slight decline in market share from 12.4% to 12.2%, contributing to investor concerns. Despite this, the company's market share estimate remains higher than previous estimates of 11.4%, indicating sustained strong performance.


With over 90% of sales in the US Celsius has recently entered into international markets. Celsius holds significant long-term potential internationally, particularly through its efforts in markets like Ireland, Australia, New Zealand, France, and the United Kingdom. Last quarter Celsius generated $16 million from international markets, compared with Monster Energy’s and RedBull’s annual revenue last year of $3 billion and $4.5 billion respectively. This indicates that there is plenty of TAM (total addressable market), if Celcius can properly distribute and market to its own target market it has high potential for success in the international markets. Their partnership with PepsiCo has enhanced distribution and bottling capabilities, contributing to impressive forecasted revenue growth.


For the upcoming quarter ending August 13, 2024, Celsius is expected to post earnings of $0.26 per share, a 52.9% increase from a year ago. The consensus earnings estimate for the current fiscal year is $1.11 per share, a 44.2% increase from the prior year, with next fiscal year's estimate at $1.45 per share, indicating a 30.9% increase. Revenue estimates for the current quarter are $425.37 million, a 30.5% year-over-year increase, with fiscal year revenue projected at $1.72 billion and $2.18 billion for the next fiscal year, reflecting growth rates of 30.2% and 26.8%, respectively.


Analysts remain optimistic about the stock, with Morgan Stanley rating it as "equal-weight" and a one year price target of $75, suggesting a potential 15% gain. Stifel analyst Mark Astrachan sees further upside potential, targeting $95 per share. Fifthteen analysts have given this stock an average 1-year price target of $88.55, and Yahoo Finance has given a target of $92, which if these targets are met would be a 43.5% and 49.1% upside potential respectively.


Short Interest and Technical Indicators


The short interest in Celsius stands at 3% of the available float, from being above 10%, now showing less downward pressure and with a high relative strength index (RSI) lower than 30%, indicates the stock is in "oversold" territory and may be poised for a short-term bounce. Historically, such conditions have led to an average 12% gain within a month.

However as a long term investor this still information can be seen as a good buy opportunity for the long term. It may return lower than $60 during this correction and that is why as a long term investor especially with a volatile stock like Celius it is important to dollar cost average your stock positions buying your way into a stock periodically to avoid such large swings of volatility, so if you wish to start a position start small and buy over time.


Key Takeaways


Celsius Holdings continues to be a high-growth company with significant potential despite recent stock price volatility. The market's recalibration of its valuation multiples in light of slowing but still robust growth rates presents a potential buying opportunity. Investors should weigh the company's strong long-term prospects against the inherent short-term volatility, keeping an eye on upcoming earnings and continued expansion efforts.

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