Celsius: The Market Proved Me To Be So Wrong (Rating Upgrade)

seekingalpha05-05

Celsius stock experienced a steep pullback and fell into a bear market in April.I turned bearish on CELH, but my rating was poorly-timed. I should have heeded my instincts against an incredibly strong...

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I should have heeded my instincts against an incredibly strong...</p>\n\n<a href=\"https://seekingalpha.com/article/4689552-celsius-the-market-proved-me-to-be-so-wrong-rating-upgrade\">Source Link</a>\n\n</div>\n","source":"seekingalpha","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Celsius: The Market Proved Me To Be So Wrong (Rating Upgrade)</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nCelsius: The Market Proved Me To Be So Wrong (Rating Upgrade)\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-05-05 20:30 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4689552-celsius-the-market-proved-me-to-be-so-wrong-rating-upgrade><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Celsius stock experienced a steep pullback and fell into a bear market in April.I turned bearish on CELH, but my rating was poorly-timed. I should have heeded my instincts against an incredibly strong...</p>\n\n<a href=\"https://seekingalpha.com/article/4689552-celsius-the-market-proved-me-to-be-so-wrong-rating-upgrade\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"SGXZ99366536.SGD","symbol_name":"United Global Innovation A Acc SGD-H","start_time":0,"source_url":"https://seekingalpha.com/article/4689552-celsius-the-market-proved-me-to-be-so-wrong-rating-upgrade","article_id":"2433348063","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/157559643/image_157559643.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2433348063","pubTimestamp":1714912200,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"Celsius stock experienced a steep pullback and fell into a bear market in April.I turned bearish on CELH, but my rating was poorly-timed. 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I should have heeded my instincts against an incredibly strong stock.Celsius faces significant risks related to its ability to replicate market share gains in global markets.Investors must still consider CELH's expensive valuation, notwithstanding its high-growth story.I explain why I've decided to upgrade CELH, as my bearish thesis is increasingly unsustainable.   Kameleon007 I Was Wrong About Celsius Stock In my previous CELH stock update in February 2024, I anticipated that Celsius Holdings, Inc. (NASDAQ:CELH) could suffer a steep pullback. As a result, I decided to downgrade CELH to a bearish rating, assessing unsustainable optimism. However, CELH buyers have continued to push back against my Sell rating, lifting CEH stock to its mid-March 2024 highs before the steep pullback arrived. Accordingly, CELH fell more than 30% from its March 2024 highs toward its recent April lows. As a result, Celsius stock dropped firmly into a bear market but still outperformed the S&P 500 (SPX) (SPY) markedly since my previous article. Recent profit-taking battered late Celsius stock buyers, even as the leading fitness-focused energy beverage company charted CELH's global expansion. I assessed that CELH investors must consider that the North American market is still CELH's most critical growth driver in the near term. Accordingly, Celsius's North American segment accounted for more than 95% of its Q4 revenue base. Celsius's partnership with PepsiCo (PEP) is fundamental to its ability to improve its distribution and scale across the segment. Celsius's Strong Partnership With PepsiCo Celsius is confident in expanding its distribution reach into convenience stores and food service to underpin its growth momentum. A recent amendment to Celsius's distribution agreement with PepsiCo initially led to fears of gross margin dilution as investors assessed the \"incentive program for PepsiCo to support the sale of Celsius's licensed products.\" Accordingly, the amendment is intended to \"incentivize and compensate PepsiCo for its continued focus on and actions to promote Celsius products.\" While the market has likely anticipated a near-term impact on Celsius's profitability, the potentially improved scale should bolster the company's operating leverage. Furthermore, PepsiCo is sanguine about the long-term benefits of its investment and partnership with Celsius, auguring well toward PepsiCo's \"commitment to further collaboration and growth opportunities.\" Questions about Celsius's ability to replicate its market share gains in global markets are justified. Furthermore, Celsius will partner with Suntory Group and not PepsiCo in its ex-North American expansion plans. Suntory has a significant food and beverage business, helping to reduce the execution risks in local market acclimatization, understanding, and distribution reach. Therefore, it should underpin a potentially successful international rollout of Celsius's offerings as it begins its global expansion phase. However, I believe it's still too early to evaluate the momentum of CELH in these critical markets, suggesting we must be careful about not buying into CELH's growth thesis too aggressively.   CELH and MNST revenue estimates (TIKR) Moreover, Celsius must also contend with intense competitive risks against Monster Beverage (MNST) and Red Bull, given their fundamentally strong business models, scale, and distribution capabilities. Despite that, Wall Street remains confident about Celsius maintaining its rapid growth momentum, although revenue growth is expected to decelerate in FY2024. Investors will likely anticipate receiving more helpful insights from Celsius management when CELH reports its first-quarter earnings release on May 7. Consequently, it's paramount for Celsius to provide more confidence to the market that it can exceed Wall Street's estimates of more than 42% topline growth this year. The growth momentum is anticipated to exceed Monster Beverage's revenue growth rates over the next three years, suggesting the need to execute well. CELH Is A Strong Stock   CELH Quant Grades (Seeking Alpha) Notwithstanding my caution, I've always believed that the market is right, while my analysis can be faulty. Therefore, it's essential to consider how the market could assess Celsius's growth story as it begins its critical expansion path internationally. CELH boasts remarkable factor grades across four of the five rated Seeking Alpha Quant categories, underscoring its robust growth thesis. Consequently, I assessed that optimism on CELH's growth story isn't predicated on weak foundations, suggesting a persistent bearish rating might not be sustainable. CELH Expensive Valuation Must Be Assessed   CELH Vs. MNST forward adjusted EBITDA multiples (TIKR) As seen above, CELH is rated with an \"F\" valuation grade, corroborating its expensive valuation against Celsius's consumer staples peers. CELH's forward adjusted EBITDA multiple of nearly 44x is well above leader MNST's 22x multiple. In other words, the market seems to have baked in significant optimism to gain market share against Monster and Red Bull in the ex-US markets. Caution must still be heeded as Celsius might need to expend more advertising and marketing resources to scale in different international markets. The partnership with Suntory has also not been battle-tested, unlike the commitment demonstrated by PepsiCo in the US. With Monster and Red Bull expected to defend against further market share losses more aggressively, Celsius could face substantial challenges against the leading players. While Celsius boasts a solid balance sheet with no debt and more than $750M in cash and equivalents, it pales compared to Monster Beverage's 3.6B cash and equivalents and net cash balance sheet. These are some of the most significant risks that CELH buyers must consider, given the high-growth premium implied in its valuation as Celsius expands globally. Is CELH Stock A Buy, Sell, Or Hold?   CELH price chart (weekly, medium-term) (TradingView) Although CELH fell into a bear market after tumbling from its March 2024 highs, buyers returned with conviction last week, helping to underpin CELH's April lows above the $65 level. In addition, buying momentum has strengthened this week, suggesting an increasing possibility that CELH could have bottomed out and resumed its medium-term uptrend bias. While I assessed that CELH's valuation risks should not be understated, the market seems ready to take CELH stock higher, given Celsius's ability to execute well (\"B+\" earnings revision grade) and supported by solid profitability (\"B+\" profitability grade). As a result, I assessed that my bearish thesis on CELH is less justifiable now, as CELH buyers help the stock reassert its upward momentum to potentially re-test its almost $100 all-time highs. Rating: Upgrade to Buy. Important note: Investors are reminded to do their due diligence and not rely on the information provided as financial advice. Consider this article as supplementing your required research. Please always apply independent thinking. Note that the rating is not intended to time a specific entry/exit at the point of writing unless otherwise specified. I Want To Hear From You  Have constructive commentary to improve our thesis? Spotted a critical gap in our view? Saw something important that we didn’t? Agree or disagree? Comment below with the aim of helping everyone in the community to learn better!","kind":null,"is_publish_news":null,"is_publish_highlight":null,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.22.4","shortVersion":"4.22.4","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2433348063"}