Down 60% from Highs, Is This Growth Stock a Buy After Earnings?

Celsius Holdings, Inc. (CELH) is a mid-cap company that develops, processes, and markets energy drinks and other nutritional supplements to consumers. Its flagship drink is CELSIUS, a fitness drink aimed towards increasing metabolism and burning body fat. Along with the ready-to-go canned beverage format, it's also available in a powdered form.

Valued at a market cap of $9.22 billion, Florida-based Celsius has production hubs in North Carolina and Wisconsin, and sells its products through convenience stores, grocery stores, clubs, fitness and health channels, and drug stores. 

CELH stock is down 30% this year, and is trading near its 52-week lows. The stock has collapsed more than 60% from its May highs just shy of the $100 level.

Celsius Slides on Growth Concerns

Celsius stock was a long-time outperformer, but the shares have been hit hard in recent months amid signs of slowing sales and inventory buildups.

In its second-quarter earnings report last week, Celsius beat revenue estimates with a top-line figure of $401.98 billion, up 23.4% on a year over year basis. Sales to Amazon (AMZN) were up 41% to $39.9 million.

Adjusted EBITDA was up 29% to $100.4 million, while gross profit as a percentage of revenue improved to 52% from 48.8% year over year. Earnings per share (EPS) arrived at $0.28 per share, on an adjusted basis - up sharply from $0.17 in the year-ago period, and topping forecasts of $0.23.

While CELH stock initially popped on the report, the shares closed lower on the day. 

On the earnings call, management failed to provide much clarity on associated inventory headwinds stemming from PepsiCo (PEP), with CFO Jarrod Langhans saying, “It was [$20 million to $30 million] when we were talking in June, ended up closer to the lower end of that range. Time will tell as we get to Q3 in terms of where we land… I think we'll have to see where we go. So unfortunately, I can't predict what our partners will do.”

Chairman and CEO John Fieldly was more blunt about the challenges facing CELH, saying, "The category is not growing."

What's the Analyst Forecast for Celsius Stock?

Analysts have been cutting their price targets on Celsius stock following the earnings report, with Bank of America downgrading the shares to “Sell” with a price-target cut all the way to $32 - a new Street-low. That suggests expected downside of about 16.7% from current levels.

Elsewhere, brokerage firms Piper Sandler and Roth MKM backed “Buy” ratings, while cutting their CELH price targets to $65 - about 70% north of here.

Priced at 38.23x forward earnings and 5.90x sales, CELH carries a premium valuation, even amid forecasts for revenue growth to slow considerably this year (+18% expected, compared to a 3-year CAGR of 99.5%). While stronger underlying trends suggest the stock should eventually become a buy-the-dip candidate, it still looks a little too early to scoop up the weakness in CELH at current levels.

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