The artificial intelligence (AI) boom has lifted Nvidia to new heights. The "Magnificent Seven" stock has soared 27,310% in the past 10 years, making it one of the world's most valuable companies.
But there's a much smaller business that has performed even better. I'm talking about Celsius (CELH +1.15%). This beverage stock has skyrocketed 27,360% in the past decade (as of June 25), turning a $10,000 investment into a jaw-dropping $2.7 million.
Let's take a closer look at Celsius' meteoric rise to becoming a $13-billion business today. Then by viewing things with a fresh perspective, investors can assess if the stock is a smart buying opportunity.
Energizing growth
If you see a stock that has skyrocketed as much as Celsius has, it's worth taking the time to figure out what factors led to such a strong performance. In this case, it shouldn't be a surprise that the key driver of Celsius' ascent has been incredible sales growth.
Behind only Red Bull and Monster Beverage, the business has become the third-largest energy drink seller in the U.S. In 2023, Celsius reported revenue of $1.3 billion. That figure was 102% higher than the year before. And it represented an impressive 25-fold increase from only five years ago.
While the broader non-alcoholic beverage industry might be extremely mature, the energy drink category is registering faster growth. Perhaps consumers aren't interested in drinking sugary beverages as much as they were 10 or 20 years ago. Or maybe there's simply a heightened focus on drinks that are supposedly healthier for you.
This is what Celsius aims to be. By marketing its products as functional beverages that have certain health benefits, it has steadily gained consumer mindshare. Any consumer-facing brand should strive to do just this.
Celsius has also benefited from getting its drinks in front of more customers. This means expanding its presence in various retail settings. The business is also finding tremendous success on Amazon, an extremely popular e-commerce site that gets billions of visitors each month.
And with the help of PepsiCo, which is Celsius' distribution partner both domestically and abroad, this company is in a favorable position to keep finding success.
NASDAQ: CELH
Key Data Points
Is it too late to buy Celsius stock?
Since hitting their all-time high in March of this year, Celsius shares have been nosediving, tanking 42% in less than five weeks. On May 28, Dara Mohsenian, a research analyst at Morgan Stanley, published a note that said the company's sales fell sequentially during the week ending May 18, causing Celsius' market share to dip slightly.
But even after its monumental decline, I still believe Celsius is an overvalued stock. It trades at a price-to-earnings ratio of 61.6. That's a steep valuation to pay, particularly as sales are slowing down. And I think it gives prospective investors zero margin of safety.
Celsius is expected to increase revenue at an annualized clip of 31% between 2023 and 2026. This is a far cry from the triple-digit growth investors have probably become accustomed to.
What also worries me is that these projections could prove to be overly optimistic. Celsius has likely already taken advantage of the so-called low-hanging-fruit opportunity with its Pepsi deal. Moreover, the industry has virtually no barriers to entry. There's nothing stopping a well-funded entrepreneur from starting his or her own energy drink business, which consumers could flock to.
Celsius has undoubtedly been a fantastic investment in the past decade, turning a small sum into nearly $3 million. But the stock doesn't look like a smart buying opportunity today.
