After 1,000% Rise In One Year, Is This Energy Drink Stock Still Worth Buying?

Celsius Holdings Inc's CELH stock has been on an impressive 1000%-plus run, but more upside could be ahead with a strong growth plan in place.

About Celsius: Celsius products have been around for over a decade, having gained entry to the energy drink market through gyms.

Celsius claims to provide essential energy and vitamins without a crash or jitters. Celsius drinks have zero sugar, are gluten free, kosher and certified vegan. The products are clinically tested.

“We’re the future of energy, we’re not your father’s energy drink,” CEO John Fieldly said in a CNBC interview.

Growth Ahead: The energy drink market continues to grow, and Celsius believes it can compete with the leaders in the space like Red Bull and Monster Beverage MNST. Coca-Cola Co KO and PepsiCo, Inc. PEP are expanding in the energy drink market through acquisitions and new product launches.

The energy drink market is the fastest growing category in the food and beverage sector, according to a company presentation. Sales are expected to grow at a compounded annual growth rate of 7%, from $60.4 billion to $84.8 billion by 2025.

The U.S. energy drink market was up 8% year-over-year in the first nine months of 2020, compared to 3% for the overall beverage market.

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Distribution Growth: After seeings its gym business drop to zero during COVID-19, Celsius has ramped up expansion to other channels. The results have boosted sales in a move that Fieldly believes will grow the company’s addressable markets.

Celsius products sell well on Amazon.com, Inc. AMZN, which Fieldly credits to their loyal fan base and gyms being closed. Celsius says it has a 14% market share for energy drinks on Amazon despite being smaller than its competitors in size.

Because of the focus on health and wellness and clinical tests, Celsius products can be found in the natural retail channel, fitness stores and drug stores, along with large retailers and grocery stores.

“Given Celsius the same opportunity and shelf presence, we will turn as fast as some of the major brands in the category,” Fieldly said.

The CEO does not believe Celsius will need a partnership or to be acquired. He said the company can compete and it is seeing demand, with more than 150 distributors signing up to sell the product as the company shifts to more direct-store deliveries for major retail and convenience store brands.

International Opportunity: One of the biggest areas of growth for Celsius could come from international expansion. Fieldly highlighted opportunity in Asia and a market-leading 10% share in Sweden to CNBC.

Celsius completed an acquisition in the Nordic region that the company believes will open up distribution to the rest of Europe.

An upcoming catalyst could be the expansion in China. Celsius is being paid $19 million in a distribution agreement from 2019 to 2023. The deal changes to a royalty-based fee of 2% to 3% per year with a minimum annual royalty of $2.2 million in fiscal 2024. Strong brand awareness and share in China could provide meaningful revenue.

Financials: Celsius had revenue of $95.1 million in the first nine months of 2020, a year-over-year increase of 86%. Sales in North America were up 57% year-over-year to $67 million. The international figure of $28 million was up significantly from the $16 million in the prior year’s period.

Celsius has reported seven consecutive quarter of quarter-over-quarter growth in the North American market.

Benzinga’s Take: With the growth plan in place and growing market share, Celsius could continue to see gains, even after a rise of more than 1000% in the last year.

The company sets itself apart through its clinically tested products and product offerings. This will allow the company to tackle target customers and retail locations.

International expansion remains a key story with royalties coming in from China and future European distribution. Investors also shouldn’t overlook the growth of North America, which continues to outperform peers.

Photo by John Fornander on Unsplash.