Celsius Stock Is Beaten Down Now, but It Could 10X

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It’s been a difficult year for Celsius Holdings (NASDAQ: CELH), with the stock trading down more than 70% from the highs it hit earlier this year. The energy drink maker ran into some headwinds recently, but its long-term prospects remain bright.

Let’s take a closer look at what is behind the decline in Celsius’ stock price and why the stock could be a strong rebound candidate in the years ahead.

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There are two primary reasons why Celsius’ stock has struggled this year. The first is that its growth normalized following the distribution deal it made with PepsiCo in 2022. The deal helped greatly expand Celsius’ presence in the all-important convenience store channel, leading to astonishing yet unsustainable revenue growth throughout 2023. As the company started to lap these distribution gains, growth inevitably slowed, but that seemed to catch many investors, who had become used to its eye-popping sales growth, off guard. As growth began to decelerate from the 95% it reported in the fourth quarter of 2023 to 37% in the first quarter of 2024 and then lower thereafter, the stock tumbled.

Meanwhile, just as the company had become close to fully penetrated within the convenience store channel, convenience stores began to struggle with traffic. For example, large convenience store operator 7-Eleven announced it would close more than 400 stores after traffic slid 7.3% in August. The company noted consumers were being more prudent with spending due to inflation, high interest rates, and the job market.

The troubles faced by convenience stores led the energy drink category to grow just 1% so far this year, compared to 8% growth in 2023.

Image source: Getty Images.

While Celsius shares struggled, there are reasons to be hopeful of the stock being both a rebound candidate next year and a long-term winner. For one, according to takeaways from the National Association of Convenience Stores tradeshow, retailers and brands are generally expecting sales to begin to improve next year. Last quarter, the company had to deal with a mismatch in inventory, but that should also begin to work itself out.

The brand also remains very popular with younger consumers, who are likely to spend more as they grow older. According to a Piper Sandler survey of 13,500 teens, Celsius was by far the most popular energy drink, with 35% naming it their favorite. Given that the brand has an overall U.S. market share of around 12%, this gives it a lot of opportunity to take away share from market leaders Red Bull and Monster Beverage (NASDAQ: MNST), which trailed Celsius in the survey.

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