Celsius Holdings Long
Unresearched Opinion:
Celsius specializes in sports drinks that give you energy and burn body fat. This company has been doing amazingly well as it went from a $5 stock in 2020 to as high as $100 this summer with a crazy 2500% return. What it usually also means for these companies is that you also have to expect high percentage changes when they release their reports and you could end up losing all your money if you are wrong about your prediction. So although we are expecting them to go up after their report today, we will only bet a tiny percent of our equity on it. Furthermore, based on my experience even the tiniest concern for these high-moving companies could cause their stock to tank which is the riskiest part when it comes to investing in them. All the predictions could be beat along with a great forward guidance but for example, if a random number on page 37 of their report is off, that could be the game changer. Now taking a look at the company itself, I don’t believe inflation to have had much of an impact on them other than transportation costs but even then, the gas prices have come and aren’t at their peak anymore. Taking a look at their customers, as it is a part of their workout routine for most of them and all other options cost around the same price, they have no choice but to continue buying from them. As more and more people are also starting to go to the gym with Covid being over, I believe their customer base is also rapidly growing. Their EPS for this quarter also backs up my points as it is expected to increase. They also have a very healthy history of beating the estimates which I believe to be the same case tomorrow.
Research Notes:
Celsius does have a distinctive product. Its growing line of flavored carbonated beverages helps folks with active lifestyles burn calories by improving their near-term metabolism rates. Red Bull and Monster dominated the first wave of energy drinks. Coca-Cola and PepsiCo tried to make a dent in the nascent beverage market with their own entries in the booming niche. It didn't work. Money, marketing muscle, and shelf space weren't enough. This could be why PepsiCo decided to invest $550 million in Celsius this summer in exchange for an 8.5% stake in the form of convertible preferred stock, a seat on the board, and rights to be its primary distribution partner in the U.S. and its preferred partner overseas. PepsiCo didn't have to think hard before making this shrewd strategic move. Celsius' growth has been stellar, accelerating in recent years. 2019: 43% revenue growth. 2020: 74% revenue growth. 2021: 140% revenue growth.
Margins could use some improvement at Celsius, but the bottom line is still impressive. Net income soared 12-fold in its latest quarter, the third time in a row that it has sailed past Wall Street's profit targets.
The consensus EPS Estimate is $0.10 and the consensus Revenue Estimate is $162.02M (+70.7% Y/Y).
Over the last 3 months, EPS estimates have seen 2 upward revisions and 2 downward. Revenue estimates have seen 4 upward revisions and 2 downward.
Overall opinion:
I believe it’s safe to say this company has been doing really well lately. They don’t have a very strong competition and Pepsi’s investment will definitely give them the boost they need. As I also said earlier, inflation also won’t have as big of an effect on them as compared to other companies and shouldn’t be too noticeable as their EPS and revenue are also growing. Due to the lack of competition, I find it hard for investors wanting to take out their investment if for some reason they do badly this quarter so the chances of them dropping tonight is very low as most investor will continue holding their shares until a better company comes along.
P/E Ratio: 209.19
Market cap: 6,233,568,547
Time: Tonight after market close
Estimate: +15%