In This Article:
Celsius Holdings, Inc. CELH has seen its shares plunge as much as 70.4% in the past year compared with the industry’s decline of 9.9%. The energy drinks player also underperformed the broader Zacks Consumer Staples sector and the S&P 500’s respective growth of 4.1% and 17.1% in the same time frame.
CELH Price Performance Versus Industry, Sector & S&P 500
Image Source: Zacks Investment Research
CELH ended the trading session at $25.69 on Friday, closer to its 52-week low of $21.10 reached on Feb. 12. While Celsius Holdings has been a high-growth disruptor in the energy drink space, the recent earnings decline, slowing revenues and intense competition seem to have fueled bearish sentiment.
Despite the sharp decline, CELH stock continues to trade at a premium compared to industry peers, a valuation that appears difficult to justify given the company’s current challenges. CELH is currently trading at a forward 12-month P/E of 26.33, considerably higher than the industry’s 16.02. Adding to these concerns, Celsius Holdings currently holds a Value Score of C, indicating potential overvaluation relative to its fundamentals.
CELH Stock Overvalued
Image Source: Zacks Investment Research
Celsius Holdings’ Set of Challenges
Celsius Holdings recently reported fourth-quarter 2024 results, wherein it witnessed a decline in the top and bottom lines. While adjusted earnings per share of 14 cents tumbled 18% year over year, net revenues fell about 4%. The decline in revenue growth highlights the company’s slowing momentum compared to its historical performance.
In addition, rising costs and promotional spending took a toll on profitability. SG&A expenses surged 73% year over year to $185 million, primarily due to legal expenses, restructuring costs and penalties paid to co-packers. This raises concerns about cost management, which could impede ongoing performance. Celsius Holdings’ increased dependency on its primary distribution partner, PepsiCo PEP, is also a cause of worry, as any adverse inventory adjustments from the latter could be potentially risky.
Further exacerbating these concerns is the competitive landscape within the energy drink category. The market has witnessed a wide range of sugar-free product launches from major players like Monster Beverage MNST and Red Bull. With heavyweight competitors aggressively expanding their zero-sugar offerings, Celsius Holdings faces heightened pressure to differentiate itself and defend its market share.
Broader macroeconomic pressures are also straining the energy drinks segment. Consumer preferences are shifting toward healthier options, while reduced discretionary spending and waning enthusiasm for energy drinks further complicate the landscape. Declining foot traffic in crucial sales channels is a concern for the company.