Up 6,800%+ in 5 Years, Celsius Stock (NASDAQ:CELH) Can Still Run
Celsius Holdings (NASDAQ:CELH) has comfortably outperformed the stock market over several years. Shares are up by 159% over the past year and have a five-year gain of more than 6,800%. CELH stock also jumped 20% after a successful earnings report. The sports beverage company has been gaining market share at a rapid pace, but the stock still looks like an enticing long-term Buy.
I am bullish on Celsius Holdings due to its high revenue growth, double-digit net profit margins, and penetration into international markets.
Domestic Revenue Growth Remains Strong
Celsius Holdings’ main driver is currently domestic (revenue generated in North America) growth. The sports beverage company delivered on this front with 97% year-over-year domestic revenue growth in the fourth quarter of 2023. Overall sales growth came in at 95% year-over-year.
High North America segment revenue growth is the key to strong financials at the moment. However, International segment growth is the company’s long-term opportunity. Celsius Holdings only made $8.7 million in International sales compared to $169.3 million in domestic sales.
The differences between these revenue numbers demonstrate how little Celsius Holdings has tapped into international markets. Despite being in the early innings, Celsius Holdings achieved 68% year-over-year International sales growth. Given the company’s high domestic sales numbers, Celsius drinks can continue to grow at a robust pace in international markets for several years.
Net Profit Margins Still Remain High
Celsius generated $39.1 million in net income in the fourth quarter. That’s a big turnaround from a $28.2 million net loss in the same period last year. The company’s net income growth resulted in an 11.3% profit margin.
Celsius Holdings has regularly received comparisons to Monster Beverage (NASDAQ:MNST). Monster is more established and has successfully penetrated international markets. It also regularly generates net profit margins above 20%.
Meanwhile, Celsius is poised to expand its margins as its revenue increases. Consistently reporting net profit margins above 20% will strengthen the stock’s valuation. The stock trades at a 59.2x forward P/E ratio. Further penetration into international markets presents an opportunity for higher profits and a lower P/E ratio.
Not everyone will like the valuation, but it will get better over the years. Investors who can buy this stock with a five-to-10-year horizon will have an easier time overlooking the high valuation and understanding what it can become in the future. Celsius Holdings has always been known for its lofty valuation, but the stock continues to deliver because of its vast potential and impressive financial growth.
What Makes Celsius Holdings Different from Other Beverage Companies?
Consumers are seeking healthier foods and beverages, and they are willing to pay higher prices for them. Celsius Holdings plays nicely into this trend, as the drink omits many of the unhealthy ingredients that are traditionally in sports beverages.
Celsius beverages do not contain sugar, high fructose corn syrup, artificial colors, or aspartame. The drink also has seven essential vitamins, accelerates metabolism, and burns body fat and calories.
The unique value proposition has helped Celsius tap into several markets, such as convenience stores, grocery stores, drug stores, fitness centers, e-commerce platforms, mass market stores, and other retailers.
Celsius has a portfolio of more than 15 beverages and uses stevia to sweeten its drinks. The company also has powder sticks. You can take these with you on the go, add water, and then enjoy a cup of Celsius.
The product mix has worked well for the company and its investors. As more consumers look for healthier alternatives, Celsius should continue to perform well. The company also has strong brand loyalty among its customers based on consistently high revenue growth. If someone drinks a Celsius beverage, it can quickly turn into a habit.
Is CELH Stock a Buy, According to Analysts?
Celsius Holdings hasn’t received many price target updates after reporting earnings. Nonetheless, the stock is currently rated as a Strong Buy based on nine Buys and two Hold ratings assigned in the past three months. The average CELH stock price target of $86.55 implies 9.2% upside potential.
The Bottom Line on Celsius Holdings Stock
Celsius Holdings is tapping into several tailwinds. Consumers are seeking healthier sports drinks and like how Celsius beverages taste. It’s a good dynamic that has experienced a lot of success in North America. The ongoing international rollout should lead to meaningful revenue growth in future quarters.
Additionally, International sales were up by 68% year-over-year. While those sales still make up a small number of total sales, Celsius Holdings has many opportunities to expand. The company’s domestic sales are still going strong, and by the time these sales slow down, international growth can take over and present more growth for investors.
Overall, Celsius is positioned to thrive in the long run. CELH has already outpaced most stocks and remains an enticing long-term opportunity, in my view.
