What happened
Shares of energy-drink company Celsius Holdings (CELH 4.93%) surged 31.3% in May, according to data provided by S&P Global Market Intelligence, and have gone on to hit new all-time highs in June. After the shares gained over 2,800% in just the past five years, many investors are betting on a pullback in the stock price. But strong financial results and bullish commentary from the analyst community only keep sending this hot stock even higher.
So what
Celsius stock has gone up so fast over the past several years that an increasing amount of people believe it's poised to soon drop. And to make money from a stock going down, you short it. In the case of Celsius, over 10.4 million shares were sold short as of May 15, according to data from Nasdaq. That's about 14% of shares outstanding, which is quite a lot.
NASDAQ: CELH
Key Data Points
While investors were betting on a drop for Celsius, it keeps going up with strong quarterly financial results. On May 9, the company reported on its first quarter, with record revenue of $260 million, up a staggering 95% year over year, blowing Wall Street's expectations out of the water.
Analysts had only expected revenue of about $219 million for the quarter. Realizing how far off their expectations were, many immediately raised their price targets. This included Piper Sandler analyst Michael Lavery, who raised his price target from $110 per share to $130, citing how the energy-drink maker is exceeding all expectations, according to The Fly.
However, after one month, Lavery's price target of $130 apparently wasn't sitting well. On June 5, he raised his price target yet again, to $165 per share. This can inspire confidence from investors. And indeed, that appears to be the case here. Right after Lavery raised his price target, shares of Celsius surged to new all-time highs.
It is now up a hearty 39% year to date. And circling back to earlier, that could be hard on those investors who sold shares short -- they're losing money. And many might be attempting to cover their short positions now as the stock surges, which can contribute to further gains for Celsius.
Now what
One thing seems assured to me: Celsius is going to keep growing. The company's sales grew in the first quarter thanks to rapidly expanding distribution. And that expansion is ongoing. Moreover, the company barely has an international presence, but given the large international presence of its rivals, it's only a matter of time before Celsius takes its show on the road.
Trading at 14 times its trailing sales, the valuation for Celsius is elevated, and it's good reason for pause. That said, its long-term opportunity continues to be optimism that the valuation is warranted for investors with a long enough time horizon.
