Three Compelling Motives to Purchase Celsius Stock Without Delay or Hesitation
Three Compelling Motives to Purchase Celsius Stock Without Delay or Hesitation
Celsius Holdings (CELH dropping by 1.18%) has been a rollercoaster ride for investors, offering both thrills and setbacks. With a staggering over 2,000% surge in the past five years, numerous investors have reaped substantial rewards from discovering a niche in the market and securing the right distribution partner.
However, the enthusiasm soon gave way to disillusionment when a major distributor adjusted its inventory purchases. This adjustment significantly dampened what was once a mind-blowing 7,200% gain within the five-year span.
Despite these concerns, the case for investing in Celsius stock is not entirely discredited, and three primary factors back this up.
1. Narrowing down a booming sector
At first glance, Celsius may seem to violate a long-standing investing rule. As per former GE Aerospace CEO Jack Welch, a company's success largely depended on it ranking either as the market leader or the runner-up within its category. Celsius continues to trail behind industry giants like Red Bull and Monster Beverage in terms of market share.
However, unlike its competitors, Celsius focuses on utilizing natural ingredients in its beverages. The guarana plant, native to the Amazon rainforest, supplies the stimulant. Its seeds contain more than double the caffeine content found in coffee beans.
This strategy presents a competitive edge that enables it to connect with health-conscious consumers who might shun energy drinks or other caffeinated beverages altogether. It might even give it a fighting chance against traditional options like coffee or tea.
2. Financial standings of Celsius
Its immediate financial performance appears to constitute another reason to dodge the stock. For instance, its $266 million revenue in the third quarter of 2024 fell by 31% compared to the previous year's figures. Even factoring in revenues from the first three quarters of 2024, a modest 5% growth rate may not encourage growth-focused investors.
The company blamed this dip on a "distributor's inventory optimization." This distributor could be PepsiCo, which signed a distribution deal with Celsius, starting in 2022. Even if PepsiCo overpurchased inventory in the past, the lessons from this misstep should minimize the impact in the future.
Furthermore, Celsius has capitalized on its strong U.S. distribution, garnering just 5% of its revenue from international markets so far in 2024. As international sales become increasingly vital for the company, a shift in focus can rekindle growth and potentially send the stock soaring in the long term.
3. Valuation
Moreover, current difficulties could make Celsius stock an attractive buy due to its discounted valuation. While many investors would dismiss Celsius stock when its P/E ratio equals 40, this valuation marks a significant decline for the company over the years. Considering the stock's long-term growth potential, some investors might believe the premium is warranted.
Additionally, Celsius's P/S ratio of 5 suggests a discounted valuation. The last time its sales multiple was this inexpensive was in 2020. Given the uncertainties surrounding the corrected inventory situation, this might be an ideal time to buy the stock.
Investing in Celsius stock
Despite the seemingly stunted growth, Celsius's business state, financial reports, and valuation indicators still suggest that Celsius stock is a worthwhile investment.
Even though it doesn't command a substantial market share, Celsius serves a vital niche within the energy drink market by sticking to a natural, health-conscious approach. This strategy might provide an edge over competitors, win market share, and even introduce health-conscious consumers to the energy drink industry.
Furthermore, the slowdown in distributor purchases may be temporary. As Celsius begins to tap into international markets, sales should steadily increase, sending the stock soaring in the long term. And given Celsius's low P/E ratio and sales multiples, those who jump on the bandwagon now may enjoy substantial returns.
- Despite the recent financial setbacks, some investors might still view Celsius stock as a potential opportunity due to its low P/E ratio and P/S ratio, suggesting a discounted valuation compared to its past and current market standards.
- For those considering investing in Celsius, the company's focus on natural ingredients and health-conscious approach could present a unique advantage in the energy drink market, potentially appealing to a niche audience and setting it apart from industry giants like Red Bull and Monster Beverage.