The market is on fire early in 2023, but some stocks are cooling their heels. More than 300 companies with market caps north of $1 billion didn't participate in January's rally, and some of those laggards will surprise you.
Celsius Holdings (CELH 0.07%), Coca-Cola (KO -0.06%), and O'Reilly Automotive (ORLY 2.15%) are among the names trading lower this year. Let's see why they aren't partying like it's 2023 right now.
Celsius Holdings
Even some of the fastest-growing businesses are proving mortal so far in 2023. Celsius is a distributor of functional energy drinks -- fruit-flavored sparkling water that also packs a proprietary blend of ingredients that it claims help improve near-term metabolism rates. Put another way, drinking a can of Celsius just before a workout is supposed to help people burn more calories.
Tasty flavors have helped broaden its beverages' appeal beyond fitness centers and spinning boutiques. Celsius is everywhere, and its sales growth has been explosive. It built a streak of five straight quarters of triple-digit percentage revenue growth before it came up just short of that last time out. However, no one can complain about the 98% year-over-year top-line increase it posted in its latest quarter, especially when the Wall Street pros were targeting only a 71% pop.
Celsius' success isn't just about a post-pandemic recovery. It just completed its sixth consecutive year with annual revenue growth of more than 40%. Analysts expect that streak will stretch to seven years in 2023.
Image source: Getty Images.
How are things going for Celsius with the stock down 3% in 2023? It did lose a case in court last month, as rapper and former Celsius spokesman Flo Rida was awarded $82.6 million in a lawsuit claiming that the functional beverage company underpaid him by misrepresenting its financials several years ago. That payout shouldn't move the needle financially for Celsius, however. And Flo Rida was sipping a can of Celsius as he addressed the press after his victory in court.
In the end, Celsius could just be a victim of its own success. The stock soared by 40% last year, even as many aggressive growth stocks plunged. The stock could be just taking a breather now. Celsius knows how to pick up the pace when it has to make up some distance.
Coca-Cola
One of the more refreshing industries for investors to have positions in last year was the soft drinks business. Even when stocks broadly were getting clobbered, shares of Coca-Cola bucked the trend and booked an 11% dividend-adjusted gain. And it wasn't just the king of pop that prospered. Most carbonated beverage companies got fizzy with it in 2022.
But the proverbial soda has gone flat so far in 2023, and not just for Coca-Cola. All three of the country's leading soft drink distributors are currently trading lower year to date. Coca-Cola's 4% year-to-date slide is modest, but that result does stand in sharp contrast to market's the general uptrend.
Why is Coca-Cola chilling in the fridge instead of heating up with the rest of the market? One could argue that the same traits that made it attractive in 2022 -- its recession-resistant appeal as a low-priced indulgence, and its appeal to income investors after 60 consecutive years of payout hikes -- are no longer in fashion. With disinflation in the works, a soft landing -- rather than the once seemingly inevitable recession -- now appears possible for the U.S. economy. Coca-Cola's 2.9% dividend yield is nice, but the top-yielding money market funds are now offering a healthier pour. Coca-Cola will naturally benefit from an economy that's bouncing back, but faster-growing companies are more appealing during bull markets. For now, at least, investors seem to be rotating away from beverage stocks.
O'Reilly Automotive
Among the bullish surprises this earnings season have been the encouraging reports from the country's automakers. Many investors figured that big-ticket purchases of new vehicles would be a problem in 2023, but so far, we've seen largely upbeat outlooks from some of the industry's bellwethers.
So why is O'Reilly Automotive -- a leading retailer of replacement auto parts -- driving in reverse? It was down 4% this year through Wednesday's close, though the only major analyst move on the stock so far this year was actually positive. Zachary Fadem at Wells Fargo boosted his price target on the shares from $850 to $925, implying nearly 15% of upside from current levels.
For answers, look back at the bullish reports from the car manufacturers. O'Reilly has delivered 30 consecutive quarters of positive comps. It's an all-weather play in the auto industry. When times are tough, folks need to keep their older cars longer, which means spending more money at O'Reilly to maintain them. We saw this play out during the pandemic. Store-level comps for its latest reported quarter clocked in 31.2% higher than they were for the same period three years ago.
But if people are not shying away from buying new cars -- and especially given the booming interest in electric vehicles, which have fewer components to maintain -- will visits to O'Reilly Automotive suffer? We're about to find out.
