Long-term investors in Celsius Holdings (CELH 0.72%) are swimming in gains. The energy drink upstart's stock is up an incredible 5,730% in the last five years, meaning anyone who bought $10,000 worth of shares is now sitting on $583,000 in wealth. Through rapid revenue growth, margin expansion, and investor excitement, Celsius has become one of the premier growth stocks of the 21st century.
The big question for investors today is: What will the company do over the next five years?
The third energy drink giant
Celsius became popular a few years back as it counter-positioned itself versus the energy drink giants Monster Beverage and Red Bull. Both brands -- rightly or wrongly -- are seen as unhealthy drinks focused on branding to extreme sports like skateboarding, motor racing, and surfing. This has been highly profitable but does not cater to a large swath of the energy drink target market.
Seeing this, Celsius branded its beverages as healthy, calorie-light, and for the everyday person focused on exercise. This branding push drove further expansion of the energy drink market, to Celsius's benefit. Over the last five years, Celsius sales are up 2,300%, with most of the gains coming from North America. It generated $1.3 billion of revenue in 2023 compared to under $100 million a few years back.
It now commands the third market share position in energy drinks in North America, with Monster and Red Bull as the two leaders. Profits are soaring. Operating income hit $266 million in 2023, which shows the fantastic unit economics of premium-packaged beverages such as Celsius.
International expansion can keep growth strong
One of the smartest moves Celsius made was letting competitor PepsiCo take a stake in its operations. In return, Celsius was able to hop on the Pepsi distribution network in North America. This is an underrated aspect of any successful consumer goods brand. Not only do they get better negotiating power with merchants, but better shelf space at the grocery store and gas station. It is hard to quantify, but the Pepsi distribution likely had a large effect on Celsius's growth in recent quarters.
Celsius is hoping to repeat this magic formula in international markets. It is going to other English-speaking markets like Ireland, the United Kingdom, Australia, and New Zealand. All of these markets were only launched in 2024.
With around 100 million people in these various countries -- a lot of whom have similar exercise and fitness hobbies as Celsius consumers in the United States -- I think Celsius has a chance to do quite well overseas. Over the long run, investors should hope this becomes a global brand like Red Bull and Monster.
CELH Revenue (TTM) data by YCharts
What will the next five years look like?
Over the next five years, I expect more strong revenue growth from Celsius. Investors shouldn't expect 2,300% growth, but there is still plenty of room for Celsius to expand in North America, and especially internationally. The global energy drink market is expected to reach $100 billion in global sales soon. At $1.3 billion in revenue, Celsius is still a minnow in the global pond.
If the company can put up 300% revenue cumulative revenue growth over the next five years, it will be doing $5 billion in annual sales by 2028. At a 25% profit margin, that equates to $1.25 billion in annual profits. Today, Celsius has a market cap of $19.3 billion. Comparing this forward earnings figure, it is clear that Celsius still has a lot of this growth priced in.
However, if the company is able to reach $5 billion in annual sales and maintain its strong profit margins, I think Celsius stock will be higher five years from now. This is one of the fastest-growing companies in the world, and I see no reason to bet against that continuing for the foreseeable future.
