For most of 2024, Celsius Holdings (CELH +1.12%) stock has been on a good run, hitting an all-time high of $96.11 in March. After a little dip in April, the stock came back up before falling nearly 40% from its 2024 high just over the last month. Shareholders have had their conviction tested during this roller-coaster ride.
There are reasons for the volatility in the stock price, but the question investors should always ask when a stock falls dramatically in a short time is whether the severity of the sell-off is warranted. Let's dig in and see why Celsius remains a stock to buy, even after this dip.
NASDAQ: CELH
Key Data Points
Meteoric growth has slowed
One of the main reasons Celsius stock has been on such a run-up over the last few years has been the company's eye-popping revenue-growth results. Over the past five years, quarterly year-over-year revenue growth has consistently been above 50%, often reaching triple digits. The company also has turned sustainably profitable and generated increasing amounts of free cash flow over the last several quarters.
Unfortunately, in the most recently reported quarter (Q1 of fiscal 2024), revenue growth was 37%. This was lower than Wall Street analysts expected, and the stock sold off, likely kicking off the 40% drawdown seen over the past several weeks.
Taken out of context, there's nothing to be concerned about with 37% revenue growth. However, when a stock has been trading near all-time highs, anything perceived as not living up to expectations could send shares tumbling.
Expanding internationally
The vast majority of Celsius' revenue comes from North America. In Q1, the share from North America was 95%. Interestingly, as overall revenue slowed to 37%, international revenue increased by 43% and revenue in Europe grew by 63% year over year. Celsius sees international markets as an opportunity for future expansion of the business.
Recently, the company began selling its products in the United Kingdom and Ireland and expects to expand further in those countries. In addition, it expects to begin sales in Australia, New Zealand, and France in the fourth quarter of this year.
The pace of this international growth is made possible by the distribution deal Celsius signed with PepsiCo in late 2022. One of the benefits of this agreement was Pepsi's ability to facilitate Celsius' international expansion.
This deal is less than one year old, but the early international results are promising. Investors should keep an eye on this over the next year as these growth efforts start to accelerate following a late 2024 launch.
Celsius isn't cheap but is cheaper
Even after the stock sell-off, Celsius is still an expensive stock. It currently trades for 11 times trailing sales (P/S) and 70 times trailing earnings (P/E). That said, both of these metrics have been significantly higher in the past year.
Celsius is also expensive when compared to its closest competitor Monster Beverage, which has a P/S of 7 and a P/E of 30. However, Monster has much slower growth rates. In Q1, the company had year-over-year revenue growth of only 12%.
While Celsius isn't cheap, it's near where its valuation has been historically over the past few years. For investors who believe the company will continue to see strong growth, buying shares today could prove to be a bargain.
That said, a further slowdown in the coming quarters would likely send the stock falling further. Dollar-cost averaging into this stock may make sense for most investors.
