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Why Celsius Holdings Stock Got Hammered Today

By Jon Quast - Mar 11, 2021 at 11:17AM

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Revenue growth in the fourth quarter slowed.

What happened

Shares of fitness-focused energy-drink company Celsius Holdings ( CELH -3.77% ) were getting hammered on Thursday morning after the company announced final financial results for full-year 2020. Revenue in the fourth quarter fell from third-quarter revenue, likely stoking fears of slowing growth from investors. As of 11 a.m. EST, Celsius Holdings stock was down a whopping 29% and is now down almost 40% from highs reached earlier this year.

So what

In Q4, Celsius Holdings generated revenue of about $35.7 million, resulting in full-year revenue of almost $131 million. This was good for 74% year-over-year revenue growth, which would typically result in resounding applause from Wall Street. However, Q4 growth slowed significantly, and even declined from Q3's $36.8 million.

A falling, red arrow crashes through a floor while a businessman looks on.

Image source: Getty Images.

Contributing to investors' fears today is the fact that Celsius Holdings' full-year profit fell from 2019. In 2019, the company reported net income of almost $10 million. For 2020, it had net income of just $8.5 million. And since the total share count has gone up over this time, earnings per share took a steeper hit. None of this is what investors were looking for from this hot growth stock.

Now what

Digging deeper into the cash flow statements, investors may be overreacting to results from Celsius Holdings today. Key metrics like gross profit and operating expenses largely improved from 2019. The company's decline in net profit has more to do with an anomaly in 2019 than a problem with 2020.

Celsius Holdings has a distribution agreement with a Chinese company called Qifeng, and it enjoyed an almost $12.5 million benefit from restructuring its deal. Without this, Celsius Holdings would have reported a loss last year. Accounting for this one-time benefit, the company's bottom line was much improved in 2020 from 2019.

As of this writing, there isn't a transcript available for Celsius Holdings' conference call that started at 10 a.m. EST. But one thing's for sure, investors will be looking at forward guidance to see if this company can continue penetrating the competitive energy-drink market as it has in recent years. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

Celsius Holdings, Inc. Stock Quote
Celsius Holdings, Inc.
CELH
$63.05 (-3.77%) $-2.47

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