It's been a rollercoaster ride for Celsius Holdings(NASDAQ: CELH) in 2024. The stock started the year hot, but has seen its shares largely trade down since. However, the stock did see a nice rally last week on some analyst news. All in all, the stock finds itself down more than 35% on the year.
With the stock showing a lot of volatility this year, the focus will soon turn to next year and whether it can rebound. Let's look to see if the stock is a buy, sell, or hold going into 2025.
Convenience store woes
Celsius stock started the year strong, as it was still riding the distribution gains it garnered from the deal it struck with PepsiCo in 2022. For its fourth quarter of 2023, which was reported in late February 2024, these distribution gains helped the company record a whopping 95% increase in revenue. This huge revenue growth powered the stock's early-year surge.
However, as it started lapping these distribution gains, growth inevitably slowed. In the first quarter, revenue growth decelerated to 37%, and it fell to 23% in the second. Meanwhile, the scanner data that Wall Street analysts use to monitor sales in tracked channels has slowed to single-digit year-over-year growth. At the same time, the company's share of the energy drink market has settled into just below the 10% range after years of solid gains.
On its fiscal third-quarter earnings call, PepsiCo -- which, in addition to being its U.S. distribution partner, also owns an 8.5% stake in Celsius -- noted the general overall malaise in the convenience store channel. It attributed this to people's concerns over the economy. Convenience stores tend to be the most important channel for energy drinks, which are often spur-of-the-moment purchases. This is the channel where PepsiCo helped Celsius get a lot of shelf space with its distribution deal.
Image source: Getty Images.
The beaten-down beverage stock got a boost last week when, in a note to clients, Piper Sandler said the Celsius brand was gaining traction in the key teen demographic. According to its recent Teen Survey, which included 13,500 participants, the energy drink brand was the most popular among this age group, with a 35% share. That was ahead of market share leaders Red Bull and Monster Beverage.
Meanwhile, in a separate note, after talking to retailers and brands at the National Association of Convenience Stores tradeshow, analysts at Stifel believe convenience store sales should pick up next year. The analysts further cited easier comparison, strategic price increases, and innovation as a reason to be bullish on Celsius stock heading into next year. They also pointed to a survey that showed continued expectation of a steady rise in overall energy drink consumption.
Is the stock a buy, sell, or hold?
A rebound in convenience store sales next year would be a boost for Celsius, which has seen its growth slow considerably as this year has worn on. The company also performs well in alternative channels such as Amazon, food service, and clubs. Its Amazon sales, for example, rose by 41% last quarter.
Meanwhile, Celsius still has a large international opportunity in front of it. The company just began selling its energy drinks in the U.K. and Ireland in Q2, solely through the fitness channel and in select gyms. Meanwhile, it is just starting to enter other international markets such as Australia, France, and New Zealand. There is a long runway of potential growth in these and other international markets.
Celsius' stock is trading at a forward price-to-earnings (P/E) ratio of just over 33 times. Whether the stock is undervalued or overvalued is largely going to depend on how much growth can rebound next year and beyond.
CELH PE Ratio (Forward 1y) data by YCharts.
If revenue growth sinks to high single or low double digits in the next few quarters, the stock could have more downside in the near term. In the longer term, I like the company's international opportunity and how the brand resonates with younger consumers, who should spend more money in the future and help the brand continue to take share.
For now, I'd hold Celsius stock. The stock could trend lower in the near term, as the convenience store channel remains weak. However, 2025 should be a better year for the company and the stock, and a better buying opportunity could emerge in the future.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Celsius, and Monster Beverage. The Motley Fool has a disclosure policy.
