What happened
Shares of Celsius Holdings (CELH 2.12%) fell over 10% this week, according to data provided by S&P Global Market Intelligence. The upstart energy drink brand is feeling pressure after its stock made major gains over the summer. Shares are off 25% from recent highs but are still up 48% this year.
As a part of the consumer staples sector, the stock is likely getting hurt due to a drawdown in the entire sector, which is occurring because of investor fears of the recent weight-loss drugs such as Ozempic.
So what
The consumer staples category has been under pressure in recent months after weight-loss drugs such as Ozempic went mainstream. This week, Walmart management said its shoppers taking Ozempic have been buying less food. Investors in consumer staples have reacted accordingly, sending the sector down around 14% from recent highs. These include companies such as Coca-Cola, PepsiCo, and Hershey.
Celsius gets grouped into the consumer staples category because it sells energy drinks that compete with soda, juice, and other beverages. However, the company may not see as much effect from the weight-loss drugs as people think. Celsius brands itself as a healthier, low-calorie option for energy drink consumers. People on these new weight-loss drugs are generally snacking less and eating fewer calories, which doesn't correlate with their caffeine intake. In fact, you could argue that Ozempic could provide a tailwind to Celsius demand as people search for lower-calorie energy drink options.
Either way, in the short run all that matters sometimes is the flow of money based on investor sentiment. Because it's a highly volatile consumer staples stock, it is no surprise to see Celsius shares falling again this week.
Now what
Celsius is one of the best-performing stocks of the past five years. Shares are up over 4,000% in that time span. This is due to rapid market share gains of its energy drinks in the U.S., with revenue up 1,710% in the last five years and still growing 112% year over year last quarter.
At its current market cap of $12 billion, the stock looks expensive at a price-to-sales ratio (P/S) of 12.5. However, if you believe it can keep growing sales at a rapid rate over the next few years, now may be a good time to buy some shares of this energy drink maker. It is likely not going to be affected by the Ozempic craze.
