Celsius Stock: From Record Highs to Market Challenges

Celsius‘ (NASDAQ: CELH) stock hit a remarkable peak at $96.11 on March 13, 2024, marking a staggering 5,310% upsurge since just four years prior. Investors were excited about Celsius’ rapid growth, its collaboration with PepsiCo, and its plans for international expansion.

However, the stock has since dropped nearly 75%. As growth has slowed, competition has intensified, and PepsiCo cut back on its inventory. This raises the question: can Celsius rebound in the coming year?

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Image source: Getty Images.

Finding a Unique Spot in a Crowded Market

Celsius offers sugar-free energy drinks made with natural ingredients like green tea and ginger. This healthy approach helped it stand out in a market led by Red Bull and Monster.

After going public in 2006, the company faced struggles due to expensive marketing campaigns and expansive distribution networks, leading to its delisting from Nasdaq in 2010.

Following this setback, Celsius completely revamped its leadership, rebranded its products, and optimized distribution. The company focused on health-focused businesses, placing its drinks in gyms and health sections of grocery stores.

These changes set the stage for Celsius’ return to Nasdaq in 2017. Between 2017 and 2023, Celsius achieved a remarkable compound annual growth rate (CAGR) of 82%, with revenue skyrocketing from $36 million to $1.32 billion. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) also improved from negative $5 million to positive $296 million.

Recent Challenges for Celsius

Celsius more than doubled its revenue in 2021, 2022, and 2023, growing its market share and collaborating with more retailers, including PepsiCo as its domestic distributor since 2022. Both gross and adjusted EBITDA margins experienced significant growth.

Data source: Celsius Holdings. YOY=year over year.

Nevertheless, in the first nine months of 2024, Celsius faced two main challenges. First, PepsiCo reduced its inventory levels following an initial surge in their partnership. Second, the pace of market share growth slowed. Celsius reported a retail market share of 11.6% at the end of the third quarter, showing only a minor increase from a year earlier.

The company may be struggling as health-conscious brands like C4, ZOA, and Monster’s Bang continue to carve out their segments. The noticeable slowdown indicates that Celsius’ business might be maturing, even while it plans to continue expanding its market presence in the U.S. and overseas.

Last year, Celsius partnered with the Japanese beverage company Suntory to distribute its drinks in the U.K., Ireland, and Canada, and it has increased sales through Amazon, which now contributes 10% of its sales. Furthermore, Celsius acquired the local manufacturer Big Beverages to improve domestic production.

Looking Ahead: Celsius in 2025

For 2024, analysts project a modest 3% increase in Celsius’ revenue as inventory adjustments and incentives for PepsiCo are expected to lower adjusted EBITDA by around 20%. However, they anticipate growth in 2025, expecting revenue and adjusted EBITDA to rise by 15% and 40%, respectively, as Celsius ramps up its expansion efforts.

Currently, with an enterprise value of $5.16 billion, Celsius trades at 16 times this year’s adjusted EBITDA forecast. This valuation appears low compared to its growth potential, although the days of triple-digit revenue growth likely have passed. If the company captures more market share and accelerates its growth, there is potential for a stock rebound in the upcoming year. Yet, it seems unlikely to reach its previous all-time highs in a fluctuating market.

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John Mackey, the former CEO of Whole Foods Market, a subsidiary of Amazon, is a member of The Motley Fool’s board of directors. Leo Sun has positions in Amazon. The Motley Fool has positions in and recommends Amazon, Celsius, and Monster Beverage. For further details, please refer to The Motley Fool’s disclosure policy.

The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.