Celsius stock in actionable zone as big investors ramp up buying

Key Points

• In the final trading days of 2023, energy drink maker Celsius rallied higher with substantial gains.
• The stock lagged the market in November, following a three-for-one stock split.
• Investor PepsiCo has opened doors to its distribution network, boosting revenue growth and leading to Celsius' first profitable year. 

Energy drink maker Celsius Holdings Inc. NASDAQ: CELH has been a fast mover since its 2017 IPO and may offer an early buy opportunity. 

The Celsius chart shows the stock consolidating above its 50-day moving average, advancing 5.82% on December 26 and another 5.23% on December 27. 

Heavier-than-normal trading volume accompanied the December 27 gain, unusual in a short holiday week. The two days in a row of buying during a normally quiet time of year indicate that one big institutional buyer may be snapping up shares ahead of anticipated price growth. 

Take a look at the Celsius analyst forecasts. 

Wall Street has a consensus view of “moderate buy” with a price target of $63.18, an upside of 13.82%. If the stock were to rally to $63.18, that would still put it below its September high of $68.95, signaling more room to run.

Institutional buyers snapping up shares

That's where a possible early entry point becomes significant. When you see an unusual price move in heavy trading volume, that shows you that the institutional investors, responsible for about three-quarters of market action, are getting behind a stock. 

Celsius stock is up 59.89% in 2023. It began correcting in September, about a month behind the broad market's pullback. Likewise, it's a bit late to the rally party, posting a decline in November while the broad market advanced. In December, Celsius stock is up 10.64%. 

With a market capitalization of $12.69 billion, Celsius is a component of the SPDR S&P MidCap 400 ETF Trust NYSEARCA: MDY, meaning the mid-cap index is a more appropriate benchmark than the SPDR S&P 500 ETF Trust NYSEARCA: SPY.

Celsius outperformed its index by a wide margin in 2023, but because it continued to correct in November, Celsius has lagged the index recently.

However, with its late-in-the-year rally, Celsius is outperforming midcap stocks on a one-week basis.

Larger rival Monster Beverage Corp. NASDAQ: MNST, tracked among S&P 500 consumer staples stocks in the Consumer Staples Select Sector SPDR Fund NYSEARCA: XLP, participated in the broad November and December rally. 

Stock split led to November pullback

Celsius stock reversed lower in November, negating a rally attempt after the company beat third-quarter earnings and revenue expectations. 

However, what kicked the stock lower was a three-for-one stock split. 

Stock splits typically send a stock's price lower due to increased supply. When a company splits its shares, more shares are available on the market. 

While the stock's market cap remains unchanged, the increased number of shares dilutes the value of each. That usually results in a lower price per share. 

However, once the market digests that pullback, if the stock has strong fundamentals, as Celsius does, investors may perceive the split as a signal that the company expects future growth. That, in turn, attracts more buyers, which we're now seeing.

Turning a profit in 2023

Speaking of those strong fundamentals: Celsius has a highly energetic three-year sales growth rate of 120%. The company should profit for the first time in 2023, with analysts expecting 77 cents a share.

The company's profit should grow 30% to $1 a share in 2024. Celsius's beverage-industry pedigree hasn't hurt its growth prospects: In 2022, PepsiCo Inc. NASDAQ: PEP took a $550 million stake in Celsius, with the funding for distribution. 

If it seemed that Celsius drinks were suddenly everywhere, you could credit Pepsi for that, as the snack and beverage giant opened up its distribution network to its new partner. 

Pepsi seeking more products in "healthy" category

But having a heavy-hitting backer like Pepsi is also a big vote of confidence. Celsius's brand is built upon being a healthier version of the traditional energy drink, using natural ingredients and less sugar. 

Pepsi has been eager to get into that space in a big way, as consumers are increasingly conscious of sugar content. 

Celsius has been a top performer recently within its nonalcoholic beverage sub-industry.