Celsius Stock (NASDAQ:CELH): How Promising Is Its International Expansion?
Many companies are seeking international expansion as a way to generate higher revenue and earnings growth. For instance, Amazon (NASDAQ:AMZN) and Walmart (NYSE:WMT) posted higher international revenue growth than domestic revenue growth. Celsius Holdings (NASDAQ:CELH), a sports beverage company now entering international markets for the first time through a partnership with Pepsi (NASDAQ:PEP), has a lot to gain.
CELH is slowly penetrating international markets, which can help the stock march higher, making me bullish. Investors are feeling optimistic about the company’s chances and aren’t afraid to pay a premium. Shares currently trade at a forward P/E ratio of 46.5. It’s time to examine why bullish investors believe Celsius Holdings is worth the premium and how international expansion can impact its total sales.
Why Are Celsius Beverages Different?
Celsius’ stock price has skyrocketed by about 4,000% over the past five years. The company has been doing several things right to warrant that type of increase. The average CELH stock price target of $71.69 from 13 analysts even implies 28.5% upside from current levels.
The company offers a tasty sports beverage drink that is healthier than most of the competition. The drink has sparkling and non-carbonated flavors, is non-GMO, and does not contain high fructose corn syrup, a common ingredient in most sports beverages. The drink is also free of added sodium, soy, gluten, and sugar. Celsius drinks consist of seven essential vitamins.
This combination of health benefits helped Celsius Holdings increase its revenue by 104% year-over-year in the third quarter of 2023. The company recently became profitable and delivered 137.8% year-over-year net income growth in the same quarter.
How Much Can International Expansion Help?
International expansion will help any company. Offering products and services outside of the United States allows companies to reach more potential customers. However, it can have a tremendous impact on Celsius Holdings. Some companies prioritize international markets when their domestic growth rates decelerate. However, Celsius is still achieving meaningful revenue growth in North America.
It’s also important to note how much of the company’s revenue comes from the continent. Out of the company’s $385 million in total revenue, $371 million came from North America. That’s 96.4% of the company’s total revenue.
Many bullish investors have compared Celsius Holdings to Monster Beverage (NASDAQ:MNST). For context, Monster has a market cap that’s almost five times higher than Celsius Holdings’ market cap.
Monster Beverage has been gaining market share in many international regions. Higher market share translated into 20.2% year-over-year International revenue growth in Q3 2023. The company generated $733.7 million in International revenue, which represents close to 40% of total net sales.
Total revenue was $1.86 billion, which was up by 14.3% year-over-year. Without the International segment, Monster Beverage only generated $1.13 billion in Q3 revenue.
For every dollar Monster makes in the U.S., it makes roughly $0.65 in International sales. Giving Celsius Holdings that ratio can lead to substantially higher revenue.
With a 1.65 multiplier from a large international presence, Celsius Holdings’ Q3-2023 revenue would have jumped from $385 million to $612.2 million. I am using the $371 million in North American revenue as the multiplier ($371 million x 1.65 = $612.2 million).
This new revenue figure represents a 225.3% year-over-year increase compared to $188.2 million in Q3-2022 revenue. Assuming the net profit margin of 21.82% remains the same, profits would have been $133.6 million instead of $84.0 million for Q3 2023.
Celsius isn’t likely to generate roughly 40% of its revenue from international markets anytime soon. However, long-term investors can wait patiently for the company to get closer to that percentage.
If Celsius Holdings has the same international reception as it did in the U.S., investors may enjoy triple-digit year-over-year revenue growth in those markets for a few years. It’s this possibility, combined with a dominant domestic performance, that has this stock trading at a high valuation.
Is CELH Stock a Buy, According to Analysts?
On TipRanks, CELH stock comes in as a Strong Buy based on 11 Buys and two Holds assigned in the past three months. As stated earlier, analysts project 28.5% upside in Celsius stock, but the highest price target of $83.33 suggests even more optimism. This price target suggests 49% upside from the current price. Even the lowest price target of $64 per share implies a 14.7% gain.
The Bottom Line on Celsius Holdings Stock
Celsius Holdings has delivered exceptional growth for investors as its sports beverages gain market share in the United States. While growth remains strong, leadership has not yet tapped into the company’s full potential.
A meaningful international expansion can fuel higher revenue growth for several years. It’s possible for Celsius Holdings to catch up to Monster Beverage’s market cap, and the company has a high-demand product that has the potential to become a big hit in other markets.
