Celsius Winning Energy Drink Race, Outpacing Rival Monster

Key Points

• Celsius is currently in a potential buy zone as its stock pulls back to trend along the 21-day moving average.
• Celsius is making a name for itself in the competitive energy drink market, outperforming key rival Monster Beverage.
• Celsius differentiates itself by being backed by science and promoting health benefits supported by self-funded studies.
• Institutional buyers have been driving Celsius' stock performance, resulting in significant inflows over the past 12 months.
• Celsius' next earnings report is expected to show significant year-over-year increases in earnings and revenue.

Celsius Holdings Inc. NASDAQ: CELH is in a potential buy zone pulling back to trend along its 21-day moving average, below a June 28 high of $153.94. 

Shares were pulling back on June 28, as the broader market was advancing. In particular, the SPDR S&P MidCap 400 ETF Trust NYSEARCA: MDY was trading higher in the session.

Celsius is making a name for itself within the competitive space for energy drinks. Among publicly traded companies, a key rival is S&P 500 and Nasdaq 100 component Monster Beverage NASDAQ: MNST, which is lagging Celsius’ recent performance over several rolling time frames. Privately held Red Bull is also a competitor. 

Celsius’ unique selling proposition, versus other energy drinks, is that it’s backed by science, and, as the company says, “clinically proven to deliver health benefits by six self-funded studies published in various journals.”  

In its annual report, the company goes on to say, “The studies have concluded that a single serving of Celsius burns 100-140 calories (by increasing a consumer's resting metabolism an average of 12%, while providing sustained energy for up to three hours.” 

The company also strives to use natural ingredients wherever possible. 

Price Performance Leads Industry

Celsius, whose stock has been a leader not only in the sub-industry of non-alcoholic beverages, but also in the S&P 400 consumer staples sector.

Here’s a look at Celsius’ recent price performance:

• 1 month: 5.17%
• 3 months: 73.75%
• Year-to-date: 46.01%
• 1 year: 87.84%

Sure, that’s a glance in the rearview mirror, and as we all know, part performance is no guarantee of future return. But the reason it’s instructive for investors is that after a prolonged run-up, it’s entirely normal to see a pullback as investors who bought in at a lower price pocket some profits.

That performance data includes two cup patterns in a row, that Celsius formed between September 2022 and May 2023. Most of those recent gains occurred in May and to a lesser degree, June. You can follow that lengthy pullback and the rally using MarketBeat’s Celsius chart. 

Institutions Energized By The Stock

Since the company’s most recent earnings report, on May 9, when shares gapped up 19.76%, Celsius stock has returned nearly 14%. That suggests institutional buyers jumping in. 

A look at Celsius’ institutional ownership data shows the buyers have clearly been in charge: In the past 12 months, 239 institutions accounted for $1.20 billion in inflows, versus 146 sellers accounting for $656.19 million in outflows. 

Even though the stock is a leader within its industry, it could still be ripe for a pullback. It’s also possible that the selling on July 18 was simply due to one institutional owner taking some money off the table. 

Regardless, the stock continues to show strong potential, as Wall Street is eyeing earnings of $1.18 per share this year, and another $1.79 a share next year, an increase of 52%. 

Pepsi Deal Driving Sales

One driver of the company’s success is its distribution deal with PepsiCo Inc. NASDAQ: PEP. In addition to Pepsi getting valuable shelf space for Celsius, the deal also included a securities purchase agreement, lock-up agreements and registration rights agreements, which pertain to Celsius' issuance of nearly 1.5 million preferred shares in exchange for cash proceeds of $550 million. 

At the time of the deal, on August 1, 2022, Pepsi owned 8.5% of Celsius shares. Pepsi also has directors on the Celsius board.

It’s a good deal for both companies. It helps Celsius grow much more rapidly than it could have done solo, and it gives Pepsi an entree into the fast-growing energy-drink space. 

When you see investments like that, it’s not out of the question that Pepsi has its eye on Celsius as an acquisition target. 

Celsius’ next earnings report is due on or around August 8. Analysts expect the company to earn $0.31 a share on revenue of $265.15 million. Those would mark year-over-year increases of 158% and 72%, respectively.