Wednesday, 8 May 2024

Why Celsius Holdings Stock Pulled Back Today

by BD Banks

Shares of Celsius Holdings (NASDAQ: CELH) were moving lower today after the fast-growing energy drink company missed estimates on the top line in its first-quarter earnings report but beat profit expectations.

Investors didn’t quite seem to know how to react to the report as the revenue growth figure was distorted by an inventory adjustment from PepsiCo, its key distribution partner. The stock fell sharply in pre-market trading after the results came out but then recouped most of those losses.

As of 11:32 a.m, ET, Celsius was down 3.5% after trading as far down as 10.1% in the regular session.

Why Celsius Holdings Stock Pulled Back Today

Image source: Celsius.

Celsius transitions to the next level

Celsius has been one of the most exciting stories in the consumer goods sector in recent years, and the stock has exploded as Celsius has gone from a niche beverage favored by gym rats to a mainstream soft drink now available at fast-food chains like Dunkin’ and Jersey Mike’s.

However, its reported revenue growth rate took a notable step down in the first quarter, with revenue growing 37% to $355.7 million, but that was short of the consensus at $389.9 million.

That growth was negatively impacted by inventory adjustment at Pepsi, and underlying growth remained strong as the company said retail sales at chain stores in the U.S. jumped 72%, indicating strong demand from the end consumer.

Further down the income statement, the company saw strong gross margin expansion, with gross margin improving by 740 basis points to 51.2%, which benefited from Celsius’s own inventory cuts and lower freight and raw materials. Over the longer term, the company is targeting a gross margin percentage in the high 40s.

On the bottom line, Celsius benefited from improving margins as generally accepted accounting principles (GAAP) earnings per share rose from $0.13 to $0.27, ahead of estimates at $0.19.

What’s next for Celsius

Celsius doesn’t give guidance, but management was looking forward to the peak summer season as it is set to gain shelf space in key channels, like convenience stores and supermarkets. The stock is expensive, but Celsius still has a bright growth opportunity in front of it as it grows the overall energy drink market, penetrates new channels like food service, and expands into international markets.

Should you invest $1,000 in Celsius right now?

Before you buy stock in Celsius, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Celsius wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $564,547!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

See the 10 stocks »

*Stock Advisor returns as of May 6, 2024

Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Celsius. The Motley Fool has a disclosure policy.