2024 has been a rough year for Celsius Holdings (NASDAQ: CELH), the high-flying energy drink maker whose shares had skyrocketed starting during the pandemic. August was another challenging month for the stock.
Slowing growth due to overstocking by distribution partner PepsiCo continued to put the brakes on the business and on the stock.
In addition to slowing growth, investors seemed concerned about broader challenges in consumer spending, fears of a recession, and the stock's lofty valuation.
According to data from S&P Global Market Intelligence, the stock finished the month down 19%. As you can see from the chart below, the stock fell early in the month on the broader market sell-off and on an underwhelming earnings report.
Celsius stock turns cold
Celsius fell sharply in the first few sessions of August as the broader stock pulled back on weak economic data. While Celsius is considered a consumer staples product, its energy drinks, which tend to be more expensive than sodas, are likely more sensitive to the strength of the overall economy.
The stock fell on its second-quarter earnings, even though it beat estimates on the top and bottom lines.
Revenue jumped 23% to $402 million, ahead of the consensus at $393.2 million, which marked a significant slowdown from the earlier quarter. Gross margin jumped from 48.8% to 52%, a positive sign that helped drive earnings per share up from $0.17 to $0.28, ahead of estimates at $0.24.
The company noted that sell-through of its product was strong, up 36.5% in the quarter in retail and convenience store outlets. However, management also cited a reduction in inventory on hand by a large distributor, understood to be Pepsi, which spooked investors in the growth stock.
Image source: Celsius.
What's next for Celsius
Celsius confirmed those problems at a conference the first week of September, saying that Pepsi's orders would fall by $100 million to $120 million in the third quarter, which will put a significant dent in its year-over-year growth.
The stock fell 12% on Sept. 4, the day of the presentation.
Celsius now trades at a more reasonable valuation -- a forward price-to-earnings (P/E) of just 36 -- though the stock's days of blowout growth are likely over.
The energy drink category is finally maturing, as shown by weak growth at larger rival Monster Beverage after a decades-long run.
Celsius stock could certainly move higher from here, but investors shouldn't expect the kind of major growth seen from the stock earlier in the decade.
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Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Celsius and Monster Beverage. The Motley Fool has a disclosure policy.
