By Evie Liu
Shares of energy-drink company Celsius dropped 3% on Monday after an analyst lowered his price target for the stock on concerns of lower-than-expected summer sales.
He is at least the sixth analyst to do so in the past week. The stock was down over 3% in Monday afternoon trading, while the S&P 500 was up 0.5%.
Celsius management recently said that PepsiCo, its major distribution partner, reduced inventory of the energy drink by $20 million to $30 million in the second quarter. This comes after Pepsi made a similar cut in the prior quarter.
In a Monday note, Roth MKM analyst Sean McGowan reduced his price target for the stock from $96 to $87, but maintained a Buy rating.
McGowan now expects Celsius' second-quarter revenue to come at $406 million, down from his prior estimate of $453 million and lower than Wall Street consensus of $415 million. Still, that is a 25% growth from the same period last year.
McGowan joined a group of Wall Street analysts who have lowered their outlook for the stock over the past week. Stifel analyst Mark Astrachan cut his price targets to $85 from $95 last Wednesday, predicting $400 million in second-quarter sales. Wedbush analyst Gerald Pascarelli lowered his target to $83 from $85, and cut the revenue estimate to $375 million.
Most analysts maintained their Buy rating on the stock, citing solid demand for Celsius products. Analysts polled by FactSet expect sales to grow 30% each year in 2024 and 2025, and have an average price target of $92. That is a 56% upside from the current level.
Although retail sales data in recent months have suggested a possible slowdown in Celsius' growth, short-term fluctuations aren't uncommon, McGowan said, noting the data have caused false alarms in the past.
McGowan believes that Celsius will continue to grow thanks to its successful and cautious expansion in the international market. In Canada, he noted, the brand took more than a 5% market share within the first two months of launch.
Celsius remains the best top-line growth story among all the companies he covers, Pascarelli said. As retailers rearrange their shelf space this summer, Celsius will likely get more exposure at supermarkets and liquor stores.
Celsius stock has had a stellar run over the past few years as energy drinks became one of the fastest-growing categories of nonalcoholic beverages. Sales more than doubled from $130 million in 2020 to $314 million 2021 as the company expanded its distribution network.
In 2022, PepsiCo invested $550 million in Celsius for an 8.5% ownership share. The deal also made Pepsi the preferred distributor of the energy-drink company, further boosting its sales to $653 million in 2022 and $1.3 billion in 2023. That is a double fold growth every year.
Celsius stock has been riding high on the rapid growth, soaring from $1 to $2 per share before the pandemic to its peak of $96 by March. But signs of slowing growth have weighed on share prices and caused volatility in recent months.
The stock had fallen to $69 on April 19, jumped back to $96 one month later, and then took a dive again to $59 as of Monday. Share prices have tumbled 37% over the past month.
Write to Evie Liu at evie.liu@barrons.com
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June 17, 2024 14:20 ET (18:20 GMT)
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