A Growth Stock in Trouble: What’s Behind Celsius Holdings’ Plunge?
Celsius Holdings, a darling of the energy drink industry, has seen its stock plummet over 60% in just six months. This dramatic decline has left investors wondering what went wrong and whether this could be a buying opportunity.
From Hot to Not
Celsius Holdings was once a high-flying growth stock, boasting impressive returns for investors. However, its growth rate has slowed significantly, and the excitement around the stock has begun to dissipate. The warning signs started flashing in May when the company reported its quarterly results, revealing a 37% year-over-year revenue growth – a far cry from the 95% growth rate achieved just three months prior.
Analysts Turn Bearish
As Celsius’ growth rate slowed, analysts began to downgrade their price targets, leading to a significant decrease in enthusiasm around the stock. The company’s most recent quarterly results only added fuel to the fire, with sales dropping 31% year over year to $265.7 million. The main culprit behind this decline was “pronounced supply chain optimization” by its largest distributor, PepsiCo.
Vulnerability Exposed
Celsius’ reliance on PepsiCo has been exposed, highlighting a significant risk for investors. The company’s net income took a staggering 92% hit, dropping to just $6.4 million. This vulnerability could make Celsius stock an unattractive option for many investors.
Long-Term Prospects
Despite the recent underwhelming earnings, investors should avoid making knee-jerk decisions based on a single quarter. Celsius still possesses attractive long-run growth prospects in the sugar-free energy market, and its partnership with PepsiCo remains a key advantage. With the stock trading at 29 times next year’s earnings – a relatively low multiple compared to its past – it may be worth considering for those with a long-term perspective.
A Word of Caution
Before investing in Celsius, it’s essential to consider the bigger picture. The Motley Fool’s Stock Advisor team has identified what they believe are the top 10 stocks for investors to buy now – and Celsius didn’t make the cut. These 10 stocks have the potential to produce exceptional returns in the coming years, making them worth exploring before investing in Celsius.
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