Health-oriented energy drink brewer Celsius Holdings (NASDAQ: CELH) has seen better days. The stock was trading near two-year lows on Nov. 20, more than 70% below the record prices of late May.
And the stock price is down for good reasons. The treasured distribution partnership with soda-and-snacks giant PepsiCo turned out to have a downside. Pepsi is revamping its inventory pipeline, dramatically reducing its Celsius orders in the process. As a result, Celsius’ torrential revenue growth reversed into a 31% year-over-year drop in the latest earnings report.
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But this looks like a great time to pick up some Celsius stock on the cheap. These shares look good for many reasons, but one catalyst stands head and shoulders above the rest. I’m talking about the company’s potential for international expansion.
Celsius is an all-American business so far. Fledgling operations in Canada, the British Isles, Australia, and New Zealand are barely moving the financial statements. International sales accounted for just 5.3% of the company’s total sales in the first three quarters of 2024. Yet, overseas revenue grew 36% year over year in this period while domestic sales only increased by 5% due to Pepsi’s inventory shift.
So Celsius investors are focusing on the soft American sales at this point, and why not? That’s where the financial action is, anyway. So it makes perfect sense to drive Celsius’ share prices steeply lower in a time of home-field struggles.
But the long-term opportunity abroad is gigantic. PepsiCo is Celsius’ preferred distribution partner on a global scale, and that collaboration hasn’t kicked in yet. The international opportunity is huge in the energy drink sector — archrival Monster Beverage collects 38% of its sales in foreign markets, with vibrant growth in Europe and Asia.
The company has barely started spreading the word about its health-conscious spin on energy drinks. I expect big things from Celsius’ international expansion efforts. The swooning stock should get back on its feet when Pepsi’s inventory action becomes old news, followed by strong gains based on surging international sales.
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