Shares of Celsius (CELH +1.95%) dropped as much as 15.7% in trading this week after an analyst note questioned the company's short-term growth. According to data provided by S&P Global Market Intelligence, the stock closed the week down 13.9%.
NASDAQ: CELH
Key Data Points
Is Celsius' growth slowing down?
Morgan Stanley analyst Eric Serotta sent out a note to clients early this week that caused the market sell-off. He said Celsius lost market share in the last few weeks, and revenue growth had slowed to 39% for the week of May 18, down from 50% growth two weeks earlier.
To say this is a short-term analysis is understating it. Any channel check is inherently short-term and only based on a few locations, so variability will be high in any results.
For context, revenue was up 37% in the first quarter. That was lower than sell-through to end customers because PepsiCo, Celsius' biggest distributor, cut its inventory during the quarter. Analysts have predicted that PepsiCo's inventory could fall again in the second quarter, complicating how we analyze Celsius' growth.
Forest for the trees
I think the right thing to do here is to look at the long-term trajectory of Celsius and its growth rate. Yes, growth is slowing, but it's still incredibly high, and it doesn't appear that there's a lack of end-user demand.
CELH Revenue (TTM) data by YCharts
Celsius will be volatile because it's such an expensive stock, trading for 69x forward earnings estimates and 9.9x forward sales estimates. I still think it's worth betting on growth, but any hiccup in results could send shares sharply lower.
