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Proprietary Data Insights Financial Pros’ Top Non-Alcoholic Beverage Stock Searches in the Last Month
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Celsius Holdings: Fast Cash or Flash in the Pan? |
In the last few months, we covered Coca-Cola (KO) and Pepsico (PEP), ranking them 10/10 and 6/10, respectively. Yet, a recent surge in search volume for Celsius Holdings (CELH), nearly double what we saw when we wrote about Pepsi, was too large to ignore. This isn’t a stock we’d researched heavily in the past. Frankly, we were skeptical of this company. But we had to know if this was the next White Claw or Clear Pepsi. Celsius Holdings’ Business Established in 2004, Celsius specializes in functional drinks and liquid supplements, focusing on health and wellness trends.
Source: Celsius 2023 Investor Presentation Celsius bills itself as a lifestyle choice, offering proprietary, clinically-proven formulas that deliver essential energy while promoting health benefits. The product line stands out for what it lacks – no aspartame, no high fructose corn syrup, and no artificial flavors or colors. Moreover, it’s non-GMO, kosher, vegan certified, and free from soy, gluten, and added sugar. The company backs up its commitment to well-being with six university studies published in peer-reviewed journals, highlighting its benefits like calorie burning, metabolism boosting, body fat reduction, and endurance enhancement. Celsius earns nearly all its sales in North America, distributing its products through partnerships with major retailers. What you may not know is back in August 2022, Pepsi took an 8.5% stake in Celsius for $550 million. This partnership allows Celsius to leverage Pepsi’s distribution channels and gives Pepsi the right to sell and distribute additional Celsius products globally. Plus, Pepsi gets a special accumulated dividend that accrues at 5% annually.
Source: Celsius 2023 Investor Presentation Financials
Source: Stock Analysis Revenues for this tiny company exploded in the last decade, effectively doubling every year or two, now over $1.1 billion. What’s equally impressive – Celsius generates cash and a positive P&L. That’s somewhat unusual for a blossoming company. They also have no debt and over $700 million in cash on hand. However, things weren’t always this grand. In 2021, Celsius burned through almost $100 million in cash. In the decade before that, they broke even on cash most years. Valuation
Source: Seeking Alpha Extraordinary growth comes at a steep cost. Celsius trades at 165x cash, more than 4.5x high-growth peer Monster Beverage (MNST), and over 8.5x Pepsi. However, Celsius trades at 62x next year’s cash. So, is it really that expensive? Growth
Source: Seeking Alpha YoY, Celsius doubled revenues and effectively plans to do that again next year. With international revenues at just $13.6 million per quarter, there is plenty of room for growth. Plus, the agreement with Pepsi allows Celsius to focus entirely on product development, marketing, and manufacturing. Profitability
Source: Seeking Alpha The only knock we really have is Celsius doesn’t achieve the same kinds of margins as its competitors. However, that lends itself to further upside if and when they improve their operations. Our Opinion 6/10 We were pleasantly surprised by Celsius. But the question is, when does the growth start to subside? Monster is close to $7 billion a year in revenues. Using that reference point, Celsius can double another 3x before growth would slow to the same scale as Monster’s, which seems reasonable. So, why the 6/10? Because any hiccup in the forecasts would decimate this stock. And given its volatility, we’d rather buy it at lower – at least down at $40 if not below. |
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