Shares of Celsius Holdings (CELH -1.42%) are skyrocketing. The health-focused energy drink maker delivered ridiculous returns in recent months. The stock rose 1,130% over the last year, including a 349% jump in the last three months alone.

The more I look at Celsius, the more I expect the surging stock chart to crash back to earth in the near future. If Celsius Holdings is a part of your portfolio, you should consider cashing in most of your profits today.

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The upside

At first glance, Celsius Holdings looks like a great growth stock whose lofty valuation is firmly supported by skyrocketing sales. Share prices in Wall Street's nosebleed seats are just standard operating procedure when the top line is surging, right?

I'm no stranger to high-growth investments. Sometimes you have to pay a steep price to get in on the early action for tomorrow's giants. It's a perfectly valid strategy, and I can see how Celsius Holdings makes sense from this angle.

In November's second-quarter report, the company's revenues rose 80% year over year. Celsius expanded its presence in domestic retail outlets dramatically while also doubling its e-commerce revenues. Celsius beverages ranked behind only Red Bull and Monster Beverage (MNST 0.51%) in the energy drink category on Amazon in each of the last three quarters. You can find the workout-oriented energy drinks at your local Walmart (WMT 0.08%) and Target (TGT -3.04%) stores, among other retail partners. What's not to love?

The downside

The fantastic revenue growth comes with a few caveats.

  • Celsius drinks are marketed to workout enthusiasts with a taste for extra caffeine. It's unclear exactly how large that hyper-specific target market might be, but it's much smaller than the global thirst for energy drinks in a broader sense, where Monster and Red Bull built their competing empires.
  • Even in the company's handpicked target market, Celsius still faces intense competition from Monster's Reign and Vital Pharmaceuticals' Bang product lines.
  • The retail expansion sounds impressive, but the stores are just dipping their toes in this relationship so far. Walmart still only sells three flavors of Celsius drinks. Target entered Celsius distribution with five flavors, but the selection has narrowed to four varieties. The big retail chains don't seem overly impressed by this brand's sales.
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Image source: Getty Images.

It's time to sell Celsius

I won't be surprised if Celsius turns out to be a short-lived fad. Current investors are betting that the company will continue to grow quickly for many years to come, eventually reaching something like one-tenth of Monster's global sales. I don't think that's a realistic goal, given this company's intense focus on a more limited target market.

To be clear, I'm not saying that you should sell every Celsius share in your possession. I most certainly wouldn't short the stock right now. Actively betting against a skyrocketing growth stock can be hazardous to your portfolio's health, since you never know exactly how much higher the stock might rise from today's already-crazy levels. Maybe you want to hold on to a few shares as a speculative experiment. Just don't buy it at these prices, and consider cashing in at least some of the inflated profits on the Celsius shares you already hold.