When John Fieldly signed off from a recent call with analysts, the chairman and chief executive of Celsius Holdings (CELH) told everyone to “stay healthy and live fit.”
All right, perhaps it’s not quite up there with Mr. Spock’s “live long and prosper” routine, but it was a logical choice of words that included the energy-product company’s “Live Fit” tagline and capped off Celsius’ presentation.
Celsius, which makes the Essential and Vibe drinks and Fast energy bars, reported fourth-quarter earnings of 17 cents a share on revenue of $347.4 million. Analysts surveyed by FactSet were calling for earnings of 16 cents a share on $331.5 million in revenue.
A year earlier, Celsius had posted a loss of 12 cents a share on $178 million in sales.
“Celsius had a stellar 2023 fourth quarter, the best earnings year in our company’s history,” Fieldly said during the March 1 call. Revenue for the year doubled to around $1.3 billion. “Celsius is now truly a $1 billion brand,” he declared.
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Celsius: Big deal with PepsiCo
Wedbush analysts Gerald Pascarelli and Antoine Legault have been pretty hot for Celsius and have cheered the company’s meteoric rise.
In March 2023, when the company was trading for about $25 a share, they added Celsius to Wedbush’s Best Ideas List, a selection of analysts’ favorite stocks in such industries as retail, technology, and financial services.
At the time, Pascarelli and Legault noted the company’s partnership with PepsiCo (PEP) , which had been announced the year before. The Purchase, N.Y., soft-drinks-and-snacks giant had invested $500 million into Celsius, Boca Raton, Fla.
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With the Pepsi deal, the analysts said, Celsius was entering 2023 “well-positioned with numerous levers to drive further growth and scale, which also come with the prospects for better profitability.”
Recent share weakness, they said then, was “simply not indicative of fundamental performance.”
It’s been a year now. At last check, Celsius was trading at $84 a share, and Pascarelli and Legault are back again.
On March 4, the analysts reiterated their outperform rating and boosted their price target to $90 from $75.
They described how Celsius is trading currently at all-time highs. The shares are up 45% year-to-date, compared with the 7.7% rise in the S&P 500. Celsius has risen 65% over the past month alone, they said.
Sounds good, especially if you’re an investor.
But then Pascarelli and Legault pulled what might seem a surprise move by taking Celsius off the Wedbush Best Ideas List.
And investors might find themselves asking, hey, what gives? Given Celsius’s amazing numbers, why bounce this company off such a prestigious list?
This is no easy task, given that the energy-drink market is pretty much dominated by Red Bull and Pepsi’s Gatorade, according to Statista.
Analysts: ‘2023 a transformative year’ for Celsius
Ah, yes, but the analysts say that Celsius’s shares are showing a little too much energy, and it’s time to turn the temperature down a little.
They removed Celsius from the Best Ideas List “simply due to what we view as more limited upside in the share price.”
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Pascarelli and Legault said that their thesis remains unchanged, and fundamentally they continue to expect Celsius to be among the best performing companies in their coverage.
They said in a research note that “2023 was a transformative year for Celsius.”
The company eclipsed $1 billion in revenue and saw its shares break through the 10% threshold at retail, “a rare feat for a number three player in a crowded and competitive energy category dominated by two brands, which collectively account for almost a 75% share of the market.”
“While growth has inevitably slowed, we remain encouraged by recent reads to start the year, as market share has been expanding sequentially and Celsius recently saw dollar-sales growth reaccelerate into early February,” Pascarelli and Legault said.
The analysts said this movement headed into the first half of the year should be enhanced by such factors as the national rollout of Essentials, new innovation on Vibe, and incremental revenue from international markets.
Celsius is currently rolling out products in Canada, which will be followed by the U.K. and Ireland along with other European markets, “which we would expect to hear more about as we progress throughout the year,” the analysts said.
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