CELH Fundamental Outlook
Equity financing has allowed CELH to avoid holding any meaningful debt on their balance sheet. Total revenues for CELH has grown at an impressive clip during it's 15 year history of being a public company. Despite their strong revenue growth Celsius has consistently struggled to convert their strong top line into strong EPS and profit margins, (this is partly due to the added shareholders from share dilution). The larger issues surrounding CELH stock is their inability to consistently turn a profit, also, due to their relatively small scale operating revenue and limited brand recognition they lack pricing power.
CELH has a price/book of 22. A price/sales of 13. CELH also has 6.66% of shares outstanding held short. CELH is overvalued . Celsius is growing revenues rapidly, but there are numerous macro and geopolitical risks that all businesses are facing at the moment and small companies with low profitability historically underperform the broader market in extra turbulent times.
The CELH health energy drink business model may at some point pay off, but I do not believe that day will come anytime soon. In fact, one of CELH's biggest competitors MNST did well over 10x the total revenues of CELH in 2021. One of Celsius's other competitors KO, currently holds 10.25 billion in free cash flow which is over double the total market cap of CELH. Albeit these stats are biasedly handpicked by myself, but they do encapsulate the overall message here, which is: CELH is very small relative to competitors and they lack the fire power that the titans in the drink industry have. The fact is that CELH will need to expand if they want to continue to grow revenues and attract investment, which means more buildings, more employees, more advertising, etc. CELH will therefore have to pay inflated prices on these new assets and projects which most established drink companies like KO, and MNST can avoid doing (at least temporarily).
The outlook does not look pleasant for CELH in the coming years. The company will need to establish itself as a dominant brand among drink consumers in the U.S. market. As for right now, 397 million in yearly revenue is not going to cut it. Especially when there is a war in Europe, inflation at 40 year highs, and U.S. interest rates are at their highest levels in a decade.
Price Prediction: I am expecting a breakdown in share price to the support area at around 24 a share within the next six months or so. I believe a move down to the support area of 7.21 a share is in store before any long term bottoms are formed.
This is not financial advice. These are just my thoughts. Good luck!
