Celsius Holdings' (CELH -0.21%) performance has been one of the stock market's few bright spots this year. Shares hit another record high just last week, in fact, despite the broad market's renewed weakness.
The stock now has a 45% gain for the year so far, and a 170% run-up over the past two years. Indeed, Celsius shares are up by more than 2,000% since late 2019, making it one of the market's most rewarding stocks over that turbulent stretch.
As the old saying goes, though, nothing lasts forever. Is Celsius Holdings still a buy after such a big, prolonged advance?
Not that you should turn a blind eye to all the potential profit-taking now on the table, but yes, Celsius has more upside ahead of it.
Celsius Holdings is on fire for all the right reasons
Celsius is the company behind the energy drink brand of the same name. But the term "energy drink" doesn't quite fully describe its products. While it's often lumped into that familiar category, Celsius may be better described as a "functional beverage" brand. According to its marketing, its lineup of drinks helps boost people's metabolisms and even assists in burning fat in addition to delivering an energy jolt.
That nuance is making a big difference for the company's financials. Revenue through the first three quarters of 2022 was up 126% year over year, driving comparable growth in operating profits. Look for those trends to continue.
Data source: Thomson Reuters. Chart by author. Revenue figures are in millions of dollars. (The bulk of this year's projected per-share loss reflects a one-time expense related to the termination of a distributorship agreement.)
Much of the credit for this past and projected growth has to be given to CEO John Fieldly. He has been with the company since 2012, but since taking the helm in 2018, he has demonstrated a keen awareness of what the market really wants. In his view, that's beverages that don't just provide function and flavor, but are free of the "wrong" ingredients as well.
Fieldly has also figured something else out: How to reach a broader target market. While the energy drinks industry has traditionally taken aim at males between the ages of 18 and 24, Celsius is proving popular with men and women up to the age of 44.
That's still not the only reason Celsius shares have been on a tear, however. Fieldly understands convenience is a key factor too. Its products are now sold in more than 174,000 U.S. locations, up from just 114,000 locales a year ago. As of the end of September, the number of convenience stores carrying Celsius drinks nearly doubled year over year to 86,000 locations.
Yet that's still just the beginning. In August, the company announced a major partnership with beverage giant PepsiCo. PepsiCo made a $550 million equity investment in Celsius at the time, but more than that, it agreed to become a Celsius distributor. While the rollout of that distribution deal is still underway, Fieldly noted that PepsiCo has 50,000 to 70,000 "owned" coolers in stores, while Celsius has just 2,700 coolers.
And that's just coolers. PepsiCo wholesales to an even bigger network of retail venues selling out of their own coolers and off of their own shelves.
It will likely take between 12 and 24 months to fully integrate Celsius-branded drinks into PepsiCo's distribution channels. In the meantime, the analyst community is calling for 50% sales growth in the coming year, which is expected to push the company well back into the black.
Be savvy, but not stingy
Is that enough of a reason to buy Celsius Holdings shares even near their all-time high? Yes. But, that doesn't mean you have to get crazy.
There's no denying this stock's three-year rally was a well-deserved one rooted in all the right reasons. There's also no denying, however, that a quadruple-digit run-up in just three years will be a tough act to follow. As shares moved higher they've also become more volatile as investors grapple with what's admittedly still a rich valuation of around 100 times next year's projected profits. If you can buy on a dip rather than stepping in right at an all-time high, you should.
Don't insist on waiting around for a phenomenal price, though. You may not get it, and the cost of waiting could be higher than the potential cost of buying this hot stock at a point other than the exact bottom of a short-term pullback.
