On Feb. 13, shares of energy drink company Celsius Holdings (CELH +1.72%) opened at just $21.47 per share, down nearly 80% from its highs in 2024. But as of March 24, Celsius stock is roaring back to life, up more than 60% from its lows in February.
To be fair, Celsius stock was down for a legitimate reason. Investors were accustomed to greater than 100% growth for the red-hot energy drink brand. But the company's 2024 revenue was only up 3% from revenue in 2023. It seemed as though it was no longer a growth stock, which was troubling enough. But investors were further concerned that perhaps Celsius was losing market share to other upstart players in the space.
NASDAQ: CELH
Key Data Points
The catalyst for Celsius' rebounding stock price was its financial report for the fourth quarter of 2024. It reminded investors that the company has far more growth ahead than what they've recently given it credit for.
How Celsius can still grow from here
Celsius' 2024 revenue hit a record at nearly $1.4 billion even though revenue was only up 3% year over year. But hidden beneath this top-line figure were more encouraging trends. Points of distribution were up a whopping 37% and sales volume was up 22%. Regarding volume, it grew far beyond the 5% volume growth for the energy drink market as a whole.
That's encouraging for Celsius. That said, investors have been worried about competition from similarly positioned brands, such as Alani Nu, which has been growing faster recently. Celsius eliminated this concern by buying Alani Nu for $1.65 billion, net of cash.
While that is a lot of money, Celsius' net purchase price of Alani Nu is a great bargain. Alani Nu has grown at a greater than 50% compound annual rate over the last three years (pending finalized 2024 results). It's profitable and is one of the leading market-share gainers in the space. And Celsius acquired it for less than 3 times sales.
For perspective, that's cheaper than Celsius' own price-to-sales valuation even though Alani Nu is experiencing much higher growth.
CELH PS Ratio data by YCharts
In my opinion, Celsius is getting Alani Nu at such a bargain that it's almost a red flag -- why is Alani Nu selling itself so cheaply? It'll be worth monitoring its financial results in the near term. But until there's fresher data, shareholders can just enjoy the favorable terms of the acquisition.
Apart from acquisitions, Celsius continues to grow on its own. International expansion was a big theme for the company in 2024, with international revenue jumping 37% year over year. Now it can add Alani Nu's brand to the mix. Celsius can expand Alani Nu's distribution domestically within existing channels and can also help take that brand global.
Celsius also recently entered the hydration market, providing another potential product lineup to profit from.
Considering it's growing domestically, growing internationally, expanding its product lineup, and making acquisitions, perhaps Celsius' growth simply took a breather in 2024 before making bigger gains in coming years.
Why this could be just the start
Taking Alani Nu's numbers under consideration, Celsius had pro forma revenue of $2 billion in 2024. This means that it trades at just 4 times its sales, which is cheap for a profitable growth company with plenty of long-term upside potential.
Moreover, Celsius can make bigger gains in profitability if things go right. In November, the company acquired one of its manufacturing partners, Big Beverages, for $75 million. This will allow Celsius to better manage inventory, experiment faster, and save money on a per-case basis. All of this can boost its profit margins long-term.
The chart below shows that Celsius' gross profit has already grown faster than revenue over the last three years. And earnings per share (EPS) have grown even more than that.
CELH Revenue (TTM) data by YCharts
Thanks to the acquisitions of Alani Nu and Big Beverages, Celsius shareholders can expect a continuation of this trend. The company's gross profit growth could continue to outpace revenue growth. And its EPS could get an even greater boost.
I'm not at all surprised that Celsius stock is bouncing back. But in my opinion, this could be just the start of a more epic comeback that plays out over the next several years.
