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Why Celsius Holdings Stock Went Up 48% in 2021

By Jon Quast – Jan 8, 2022 at 1:58PM

Key Points

  • Sales of Celsius' energy drinks are shattering records as the company increases distribution.
  • Management is mitigating challenges well, although its profit margins are temporarily depressed.
  • Insiders are selling roughly 16% of shares outstanding, which is hurting the stock here at the start of 2022.

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Sales boomed in 2021, but insiders are bailing in 2022, spooking investors.

What happened

Shares of fitness energy drink company Celsius Holdings (CELH 6.44%) went up 48.2% in 2021, according to data provided by S&P Global Market Intelligence. The company has turned in record financial results quarter after quarter despite facing a variety of challenges, helping it to outperform the S&P 500's stellar 27% return for the year. But surprisingly, Celsius stock has not fared as well in the first week of 2022, swiftly dropping 27% from the start of the year, as of the market's close on Jan. 7. 

So what

Celsius produces energy drinks that are growing in popularity. In fact, the company's revenue has more than quadrupled over the past three years as it has rapidly expanded its distribution. And this impressive growth story finally caught the eye of Standard & Poor's on Jan. 7 when it added Celsius stock to the S&P SmallCap 600 index.

A woman in an office raises her hands in celebration while viewing a coputer screen.

Image source: Getty Images.

Being added to the index did provide a short-term catalyst for Celsius' stock price because index funds had to buy its shares. But more than this, being added to an index is kind of like taking out an advertisement -- it provided Celsius with some increased exposure among investors who may not have been aware of the company.

It's certainly a company investors need to be aware of. Fourth-quarter 2021 results are pending, but Celsius has set quarterly revenue records in each of the other three quarters of 2021. First-quarter revenue was $50 million, second-quarter revenue was $65 million, and third-quarter revenue was $95 million, representing year-over-year growth rates of 78%, 117%, and 158%, respectively. And these impressive growth rates weren't the result of easy comparisons. Full-year 2020 revenue was up a whopping 74% from 2019.

However, Celsius is more than just a rapid growth story. Management has also done a good job at navigating challenges, such as the aluminum can shortage. The company could have slowed down its growth but instead chose to source its cans from another supplier at a higher cost, hurting its gross margin.

Celsius' gross margin in 2020 was 46.6% compared to 41.2% through the first three quarters of 2021. But this seems to be a prudent choice since it allowed it to keep growing. And once the supply chain issues are resolved, this is a potential tailwind for profits because the company can go back to sourcing cans as it did before the pandemic.

CELH Chart

CELH data by YCharts.

Now what

As mentioned at the outset, Celsius stock has started 2022 on the wrong foot. Many growth stocks have pulled back, so perhaps this is what's impacting the company. But it's also likely that the market doesn't like what it's seeing with insider activity. CEO John Fieldly closed 2021 by selling 20,000 shares of Celsius stock, though it's important to note that Fieldly still owns over 265,000 shares.

But to start 2022, Charmnew Limited and Grieg International Limited have both registered to sell all of their shares of Celsius. Together, these two groups own 16.3% of the stock.

Executives and private-equity investors have particular needs and goals, so investors shouldn't necessarily take their selling as a bad omen. Celsius still has room to grow distribution and catch rival Red Bull. So it will be interesting to hear management's goals for 2022 the next time the company reports. 

Celsius is expected to report fourth-quarter results in early February.

Jon Quast has no position in any of the stocks mentioned. The Motley Fool owns and recommends Celsius Holdings, Inc. The Motley Fool has a disclosure policy.

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