Celsius Holdings, Inc.

CELH Details

Celsius Holdings, Inc. (NASDAQ: CELH) is engaged in the development, marketing, sale, and distribution of functional calorie-burning beverages under the Celsius ® brand. Celsius® has no chemical preservative, aspartame or high fructose corn syrup and is very low in sodium. The company has a market capitalization of $3.7 billion as on 5^th May 2021.

Results Performance (Year ended 31 December 2020)

Revenue of the company for the full-year period stood at around $130.7 million, an increase of 74.0% on the previous year. North America contributed majorly to the revenue which recorded 60% YoY growth in revenue to $95.5 million. The balance of the increase was largely attributable to a 133% growth in European revenues to $33.7 million and 30% growth in Asian revenue to $1.02 million. The increase in revenue could primarily be attributed to an increase in sales volume rather than an increase in product pricing. The reason behind the increase in North American sales volume is growth in the e-commerce channels. However, the company reported a decline of 15% YoY in its net income to $8.5 million, as compared to net income of $10.0 million in 2019 on account of an increase in operating expenses.

Key Data (Source: Company Reports)

Outlook:

The company is on a growth path. It has undertaken significant marketing efforts aimed at building brand awareness. It distributes its products domestically through a hybrid of direct store delivery and sales direct to retailers. In the global market, mainly in Europe and Asia, the company distributes its products through regional or country-specific distribution partners. The company recently acquired Fund Food, its Nordic distribution partner, and intends to use it as a platform to expand product distribution elsewhere in Europe. Further, it is closely monitoring the COVID-19 pandemic and its potential impact on its supply chain, distribution, and consolidated results of operations.

Key Risks:

The company’s business may get adversely affected by changes in the global macro-economic environment and the negative impacts caused by pandemic and public health crisis.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

Technical Overview:

Weekly Chart –

Source: Refinitiv (Thomson Reuters)

Note: Purple colour lines are Bollinger Bands® with the upper band suggesting overbought status while the lower band oversold status, and yellow lines are Fibonacci retracement lines which measure price rebound and backtrack. https://www.bollingerbands.com/

The stock has witnessed a sell-off in the ongoing week, forcing it to close around its low of $51.43 at $52.00. Technical indicator RSI with a reading around 54 and curve at the end pointing down, suggests softening of bullish momentum for the stock.

Going forward, the stock may have resistance around a 23.6% retracement level of $58.82 whereas support could be around the 50% retracement level of $45.24.

Stock Recommendation:

The company’s gross margin and EBITDA margin improved from 41.7% and -0.7% in FY19 to 46.6% and 6.8% in FY20, respectively. Its current ratio for FY20 stood at 3.53x, better than the industry median of 1.70x, implying that the company possesses better capabilities to meet the short-term obligations than the peer group.

We have valued the stock using EV/Sales multiple-based illustrative relative valuation and have arrived at a target price which reflects a rise of low-double digit (in % terms). We have assigned a slight premium to EV/Sales Multiple (NTM) (Peer average) considering robust liquidity position which could help the company moving forward. The stock rose by ~121.3% in 6 months. The stock made a 52-week low and high of $4.50 and $70.49, respectively and is trading towards the 52-week higher levels.

Thus, we give a “Buy” recommendation on the stock at the current market price of US$52.00 per share, down by 1.4% on 5^th May 2021.

CELH Daily Technical Chart (Source: Refinitiv (Thomson Reuters)) 

Note: Investment decisions should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

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