Updated: Apr 15
On March 22nd I announced the addition of CELH stock to my portfolio. Below are the reasons for my picking this stock for my portfolio.
Stock Price: $43.49
Market Cap: $3.16 billion
Investor Presentation [click here]
2020 Annual Report, Form 10-K [click here]
Current Report, Form 8-K [click here]
2020 Full Year and Q4 Earnings [click here]
2020 Full Year and Q4 Earnings Call [listen here]
2020 Full Year and Q4 Earnings Call Transcript [read here]
I highly recommend reviewing the investor presentation. I am going to use a few slides in this post, but there is more interesting information there.
Celsius Holdings, Inc. develops, markets, distributes, and sells functional calorie-burning fitness beverages in the United States and internationally. The company offers its beverages in various flavors, including carbonated orange, wild berry, cola, grape, kiwi-guava, and watermelon; and non-carbonated green tea raspberry/acai, green tea/peach mango, green tea/grapefruit melon, pineapple coconut, watermelon berry, and strawberries and cream, as well as sparkling grapefruit, cucumber lime, and orange pomegranate under the Celsius name. It also provides Celsius Heat, a dietary supplement in carbonated flavors, such as apple jack’d, orangesicle, inferno punch, cherry lime, blueberry pomegranate, strawberry dragonfruit, tangerine grapefruit, and jackfruit. The company distributes its products through direct-store delivery distributors, as well as through retailers comprising supermarkets, convenience stores, drug stores, nutritional stores, and mass merchants; and health clubs, spas, gyms, the military, and e-commerce Websites. The company was formerly known as Vector Ventures, Inc. and changed its name to Celsius Holdings, Inc. in January 2007. Celsius Holdings, Inc. was founded in 2004 and is based in Boca Raton, Florida.
Celsius is a relatively new player in the energy drinks category, but it has a very distinctive product and position which makes me bullish on the company in the long run.
The category itself has been growing nicely over the past many years.
Below are the sales for the key players in the category:
Obviously, when looking at CELH, I right away think about Monster Beverage Corp. Many investors know the story of this company, its success over the past 20 years and how the stock price for Monster went up from $0.09 in 2003 to its current price of $91, meaning its price increased over 100,000% over the past 20 years. Now, we obviously cannot expect the same price action for CELH, not at the current price and market capitalization. Maybe you could get to those numbers if you bought CELH at the end of the last year when it was at $4.
However, we can use Monster Beverage Corp. as a benchmark. The current market capitalization for MNST is $48.4 billion. The market capitalization for CELH is $3.16 billion. The question is: can CELH get to at least half the size of MNST? This would mean a market cap of $24.2 billion and a 665% growth from the current levels.
Another piece of the puzzle for valuations is the recent acquisition of Rockstar by PepsiCo for $3.85 billion. We have to also keep in mind that according to Forbes, Rockstar’s annual average sales growth has slowed dramatically in recent years, plummeting from 103% annually in the company’s first six years to just 8% annually since then. So, PepsiCo paid for a fading brand with hopes to revive it.
What makes Celsius different?
CELH is a healthier, lighter, and more refreshing energy drink that is built around their proprietary “MetaPlus” blend which includes natural ingredients such as guarana extract, green tea leaf extract, ginger root extract, taurine, and of course caffeine. Celsius has a big portfolio
CELH has been growing its sales nicely over the past few years attacking both USA and international markets.
In addition, CELH has ambitious goals for continued expansion.
Current sales for CELH ($130.7M) are tiny compared to Monster ($4.6B).
CELH grew sales at 74% over the past year. This growth was achieved in the middle of a pandemic with gyms shutting down and retailers limiting foot traffic.
It is likely that the sales continue to grow at the similar pace for the next 2-3 years. After that, we should expect the growth to decline unless CELH reinvests the cash into other products. If we take an assumption that CELH grows sales at 70% for the next 2-3 years this will take the company much closer to Rockstar's share.
Also, with current level of sales, CELH does not enjoy similar levels of gross margin as Monster does, but Gross Margins tend to improve once the stores start to want to have your products and reduce concessions. In addition, with more sales, the company will spread overhead costs across larger volumes of produced product and this will also usually reduce gross margin.
In addition, CELH acquired Func Foods in October 2019 which brought in some new beverages, protein bars, supplements and superfoods that are marketed and distributed in Finland, Sweden, and Norway. These products are distributed under the FAST, FitFarm and CocoVi brands. FAST products is a market leader in Finland and has begun distribution into the Swedish market. FitFarm and CocoVi are well-established brands of superfoods and other supplements in the Nordic countries.
Analysts' Targets for CELH
There are currently 2 analysts covering CELH and they provide a BUY rating for CELH.
The average target price for CELG is $64.
Analysts are predicting CELH will grow sales at an average 40% for the next 4 years. I do believe CELH may crush the predicions for 2021 given the activation, aggressive addition of Celsius to stores. CELH is currently authorized in more than 82,000 locations and it is expected that this number will hit 100,000+ in the near future. You can now find Celsius at Walmart, Target, CVS, Vitamin Shoppe, GNC, 7-Eleven, Dick’s Sporting Goods, Kroger, The Fresh Market, Sprouts, HEB, Publix, Winn-Dixie, Harris Teeter, Shaw’s, Food Lion, Speedway and thousands more.
With growing revenue, analysts are predicting CELH will achieve EPS of $0.74 by the end of 2024. Monster is currently trading at a PE ratio of 34. If we use the same valuation, we would arrive at a price of $25. This is still below the current price, but if CELH continues to grow revenue at the same pace, we should see CELH to be priced fairly (based on EPS) by 2025. If CELH manages to grow its revenue faster in the next 2-3 years we might see EPS of $1 or above by the end of 2024.
Disclaimer: As usual, trade at your own risk. I own CELH stock. I do not suggest you should buy any of the stocks I write about. As usual, please do your own due diligence before investing your own money in any of the stocks I write about. The above analysis is quite basic and just gives ideas for further research. A much deeper analysis is required for each stock, including the analysis of operations, debt, etc. I may sell any of the stocks I say I currently own at any moment before it reaches the targets that I set or keep them for even when they reach the target.