Time has been kind to longtime Celsius Holdings (CELH 2.12%) shareholders. The stock is up a market-thumping 83% over the past year, and zooming out, the picture is even sweeter. Celsius stock is a 10-bagger over the last three years and a 35-bagger over the past five years.
Growth will inevitably slow for the functional energy drink speedster, in terms of both top-line gains and share-price upticks. However, it doesn't mean that the company can't continue to kick up its metabolism in order to quiet the naysayers. Let's take a look at where Celsius could be by the summer of 2026.
Making the bubbles last longer
Celsius has come a long way in just the last three years. Revenue exploded from $75.1 million in 2019 to $653.6 million in 2022. The brand was already starting to break out of its roots at fitness centers, nutrition stores, and warehouse clubs into more mainstream retail outlets, but it blew up during the pandemic.
The canned product's appeal -- a carbonated drink that helps burn calories and fat by temporarily boosting one's metabolism -- was perfect for folks wanting to remain active during the shelter-in-place phase of the COVID-19 crisis. Unlike some pandemic-era winners that were quickly set aside as the world reopened, Celsius sippers became hooked and craved more of the tasty fruit-flavored sparkling beverages. Revenue soared 95% in its latest quarter, after more than doubling in 2021 and 2022.
Image source: Getty Images.
Analysts naturally anticipate decelerating growth at this point, but Celsius is still wearing its running shoes. Wall Street sees the beverage stock darling generating nearly $2 billion in revenue come 2025, more than tripling last year's top line. At first, the forecast may seem overly ambitious. Doesn't Celsius already have a strong presence at supermarkets, mass-market retailers, and convenience stores?
The best reason to believe that Celsius will continue to beat the market in the coming years is its partnership with PepsiCo (PEP -0.62%) that was cracked open last summer. The soft drink giant invested $550 million for an 8.5% convertible preferred stake in Celsius, and with that move it became the brand's new domestic distribution partner. More importantly, it also opened the door for PepsiCo to use its globetrotting reach to make Celsius a star overseas. As popular as Celsius has become in the U.S., international sales account for just 4% of the revenue mix right now. PepsiCo can obviously change that.
PepsiCo has already helped broaden Celsius' reach domestically, landing it new accounts at hotel chains, airports, and casinos. The real potential comes when PepsiCo starts flashing its golden passport outside of the country. As lofty as Wall Street expectations may seem, Celsius has historically blasted through those growth targets. It has the right partner to take things to the next level.
Celsius turned profitable in 2019, and for the most part it has stayed that way. It did post a loss last year, but that was entirely the handiwork of a one-time charge related to PepsiCo taking over as a distributor. Analysts see Celsius earning $3.18 a share in 2025. This doesn't make the stock seem necessarily cheap. It's still trading at 46 times what analysts believe it will earn two years from now. However, Celsius has always earned the right to trade at a healthy premium to traditional market valuation multiples. Given its long history of growth and "beat and raise" performances, it also wouldn't be a surprise if Wall Street's profit estimates for 2025 and beyond continue to climb in the coming years.
There will always be risk when it comes to Celsius. The product's popularity could fade in the U.S., and international expansion may not pan out as well as it did on its home turf. The optimistic take here is that the returns will far exceed the related risks. Recent retail-level trends suggest another strong quarter is coming when Celsius reports next month. Celsius also has a strong track record of burning naysayers. The stock's high short interest approaching 14% of its shares outstanding suggests the next whiff of good news can trigger another short squeeze.
The last three years were great to Celsius shareholders. The next three years aren't likely to see the stock pop tenfold, but with strong domestic momentum and PepsiCo helping the brand push internationally, even a richly valued Celsius can double if not triple in the next three years if it keeps delivering blowout quarterly performances.
