Executive Summary:
Celsius Holdings, Inc. is a company that develops, processes, markets, distributes and sells functional energy drinks and liquid supplements. The company’s flagship product, CELSIUS, is a fitness drink designed to accelerate metabolism and burn body fat. CELSIUS is available in a variety of flavors and is sold in ready-to-drink cans and powder form. The company’s products are sold in retail channels across the United States and internationally, including supermarkets, convenience stores, drug stores, nutritional stores, mass merchants, health clubs, gyms, the military, and e-commerce websites.
Celsius Holdings, Inc. experienced a 31% decrease in quarterly revenue to $265.7 million, primarily due to inventory optimization by their largest distributor. Celsius saw a 7.1% year-over-year increase in retail sales and a 7.3% rise in unit sales, contributing to 16% of the overall energy category growth. Diluted EPS was $(0.00) compared to $0.30 for the prior-year period. Celsius maintains a year-to-date revenue of $1.02 billion, marking a 5% increase from the previous year.
Stock Overview:
| Ticker | $CELH | Price | $23.18 | Market Cap | $5.45B |
| 52 Week High | $99.62 | 52 Week Low | $23.51 | Shares outstanding | 235.03M |
Company background:
Celsius Holdings, Inc. is a beverage company specializing in functional energy drinks. Founded in 2004 by Viktor Zilberberg, Celsius initially focused on developing a drink that could boost metabolism and calorie burning through thermogenesis. The company’s core product, CELSIUS, is marketed as a healthier alternative to traditional energy drinks, containing ingredients like green tea extract, guarana extract, and ginger extract, while being sugar-free and containing no artificial colors or flavors.
The company has navigated various stages of funding and growth, eventually becoming a publicly traded company. This allowed them to expand their production and distribution capabilities, reaching a wider consumer base. A turning point came with a distribution agreement with PepsiCo in 2022, significantly broadening Celsius’s reach and market penetration.
The company’s primary product line revolves around the CELSIUS fitness drink, available in various flavors and formats, including ready-to-drink cans and powder packs. They have also expanded into other product lines like Celsius HEAT, a higher-caffeine version, and Celsius BCAA, focused on muscle recovery. All of these products emphasize the “thermogenic” properties of the original formula and market themselves as beneficial for active lifestyles.
Celsius faces stiff competition in the rapidly growing energy drink market. Key competitors include established giants like Monster Beverage Corporation, Red Bull, and Bang Energy. These companies offer a wide range of energy drinks with varying formulations and marketing strategies. Celsius differentiates itself through its focus on health and fitness, targeting consumers who are looking for a more natural and functional energy boost.
Celsius Holdings, Inc. is headquartered in Boca Raton, Florida. This location serves as the base of operations for the company’s management, sales, and marketing teams.
Recent Earnings:
Celsius Holdings, Inc. reported revenue for the third quarter of 2024 was $265.7 million, compared to $384.8 million for the same period in 2023, representing a 31% decrease. This decline was largely attributed to a $123.9 million reduction in revenue from their largest distributor. The year-to-date revenue still showed a 5% increase, reaching $1.02 billion compared to $970.6 million in the same period last year.
Diluted earnings per share (EPS) was $(0.00), compared to $0.30 for the prior-year period. This drop in EPS reflects the impact of the revenue decline and increased promotional activities. The year-to-date EPS was $0.55, compared to $0.60 in the same period last year, indicating a less drastic decline over a longer timeframe. The company also saw a decrease in gross profit margin, which was 46.0% for the third quarter of 2024, compared to 50.4% for the same period in 2023.
International sales increased 37% year over year in the third quarter, demonstrating the company’s global expansion efforts. Celsius emphasized the growth of the sugar-free energy category, which contributed to their year-to-date revenue exceeding $1 billion. The company also noted the acquisition of a co-packer, which is expected to unlock innovation and manufacturing capabilities.
The company’s management emphasized their focus on driving growth through expanded product availability, increased consumer awareness, and continued innovation. The company’s acquisition of a co-packer suggests a focus on expanding production capabilities and potentially introducing new products.
The Market, Industry, and Competitors:
Celsius Holdings Inc. operates primarily in the functional beverage market, focusing on the development and distribution of energy drinks designed to enhance fitness and wellness. The company’s flagship product, CELSIUS, is marketed as a health-oriented energy drink that promotes metabolism and fat burning. The functional beverage market, which includes low-sugar and health-focused drinks, was valued at approximately $176.35 billion in 2022 and is expected to grow significantly due to rising consumer demand for healthier beverage options.
Celsius Holdings are robust, with analysts projecting a compound annual growth rate (CAGR) of 8.5-10.5% for the functional beverage market from 2023 to 2030. This growth is fueled by trends favoring low-sugar beverages and natural ingredients, as well as an increasing focus on fitness and wellness among consumers. Celsius has already demonstrated strong performance, reporting $357.4 million in net revenue for 2022, marking a 33% year-over-year increase. If Celsius can align its growth with the broader energy drink market’s projected CAGR of 8.7%, its revenue could potentially double by 2033.
Unique differentiation:
Celsius Holdings operates in a highly competitive energy drink market, facing off against some of the biggest names in the beverage industry. Among its primary competitors are established giants like Monster Beverage Corporation and Red Bull GmbH. These companies have a long history in the energy drink space, boasting extensive product portfolios, massive marketing budgets, and widespread distribution networks. Monster, with its diverse range of flavors and variations, caters to a broad consumer base, while Red Bull is renowned for its iconic brand image and association with extreme sports and high-energy lifestyles.
In addition to Monster and Red Bull, Celsius also competes with other significant players in the energy drink market, such as Bang Energy and Rockstar Energy. Bang Energy has gained popularity with its focus on fitness enthusiasts and its high-caffeine, sugar-free offerings. Rockstar Energy, owned by PepsiCo, benefits from the parent company’s vast distribution network and resources, giving it a significant edge in reaching consumers. Celsius differentiates itself from these competitors through its emphasis on “healthy energy,” highlighting its use of natural ingredients, sugar-free formulations, and thermogenic properties.
Clinically Proven Formula: Celsius boasts that its products are backed by scientific research and clinical studies, demonstrating their effectiveness in boosting metabolism and burning calories. This scientific validation provides a competitive edge, as consumers are increasingly looking for evidence-based products that deliver on their promises.
Strategic Partnerships and Distribution: Celsius has formed key partnerships, most notably its distribution agreement with PepsiCo. This collaboration has significantly expanded Celsius’s reach and market penetration, enabling it to compete more effectively with larger players in the industry.
Management & Employees:
John Fieldly serves as the Chief Executive Officer and Chairman of the Board. He has been with Celsius since 2012, previously holding positions as CFO and interim CEO.
Paul Storey is the Chief Supply Chain Officer. He joined Celsius in 2021 and has extensive experience in operations roles at companies like Monster Energy and Rockstar Energy.
Kyle Watson is the Chief Marketing Officer. She has been with Celsius since 2019, previously serving as Executive Vice President of Marketing.
Financials:
Celsius Holdings Inc. has net sales surged from approximately $75.15 million to $1.318 billion, reflecting a staggering CAGR of 94.3% during this period. This growth trajectory can be attributed to the increasing demand for health-oriented beverages, as well as effective marketing strategies and expanded distribution channels. This year-over-year increases, particularly a 101.65% rise in 2023, underscore Celsius’s strong market position and consumer acceptance.
The net income rose from a loss of $198.8 million in 2022 to a positive figure of $182 million in 2023, marking a dramatic turnaround and an impressive earnings growth rate. The CAGR for earnings over the same five-year period stands at approximately 45%, indicating the company’s ability to not only increase sales but also improve profitability effectively.
Celsius Holdings has made strides in reducing its net debt, which transitioned from negative figures in previous years to a projected net debt of -$881 million by 2025, indicating a strong cash position and financial stability. This improvement reflects the company’s successful capital management and ability to generate cash flow from operations.
The company’s strategic initiatives and focus on innovation are expected to support its growth trajectory as it capitalizes on emerging trends in the functional beverage sector. Celsius appears well-equipped to navigate future challenges and opportunities in the dynamic beverage market.
Technical Analysis:
The stock is in a stage 4 decline on the monthly and weekly charts and is on a stage 4 decline on the daily chart as well. The support seems to be in the $18 range which is another 10-15% lower from its current price. The stock would be at an easy point to not purchase right now. We would wait for a reversal, but not expect the stock to go higher from there easily.
Bull Case:
Continued Growth in the “Healthy Energy” Segment: Celsius is well-positioned to capitalize on the growing consumer preference for healthier energy drinks. The “better-for-you” energy drink category is expanding rapidly, and Celsius’s focus on natural ingredients, sugar-free formulations, and functional benefits aligns perfectly with this trend. If this trend continues, Celsius is poised to benefit.
Expansion of Distribution and Market Reach: Celsius’s partnership with PepsiCo has significantly broadened its distribution network. Further expansion, both domestically and internationally, could unlock substantial growth opportunities. Increased availability in more retail outlets and new markets can drive sales volume.
Acquisition Target: Celsius’s strong growth trajectory and unique position in the market could make it an attractive acquisition target for larger beverage companies seeking to expand their presence in the energy drink sector. Such an acquisition could provide significant upside for Celsius shareholders.
Bear Case:
Dependence on PepsiCo: Celsius’s distribution agreement with PepsiCo is a double-edged sword. While it has significantly expanded Celsius’s reach, it also creates a dependency on PepsiCo. Any disruption in this relationship, or a shift in PepsiCo’s priorities, could negatively impact Celsius’s distribution and growth prospects.
Changing Consumer Preferences: Consumer preferences in the beverage industry can be fickle. Trends like the “healthy energy” movement could fade, or new trends could emerge that Celsius is not well-positioned to capitalize on. Adapting to changing consumer tastes is crucial for long-term success, and any missteps could hurt the company’s performance.
Supply Chain Disruptions: Celsius, like many other companies, is susceptible to supply chain disruptions. Rising input costs, logistical challenges, or issues with co-packers could negatively impact production and profitability.
