Celsius Stock Faces 75% Drop Amid Distributor Slowdown

Celsius stock is struggling, down 75% from highs this year due to a slowdown in distributor purchases. Investors may view this pullback as a potential buying opportunity, despite concerns about future growth prospects.

Date: 26-01-2025

AI Rating: 4

Celsius Stock Performance
Celsius (NASDAQ: CELH) has experienced remarkable growth since 2018 under John Fieldy's leadership but has recently faced challenges leading to a significant stock drop. With a peak increase of over 6,300%, the stock has now declined 75% from its high in 2024, primarily because of a purchasing slowdown by a key distributor.

Revenue Decline and Net Income
The third quarter of 2024 marked a stark downturn, with revenue dropping to $266 million, which is 31% lower than the same quarter in the previous year. This marks a severely negative shift from the 104% revenue growth observed in Q3 2023. Additionally, net income plummeted from $105 million in Q3 2023 to just $8 million in Q3 2024, indicating substantial profitability concerns.

Market Dynamics
The slowdown in distributor purchasing appears linked to broader retail sales patterns. The report notes that retail sales growth in the energy drink sector fell to just 7% annually, down from 161% the year prior. Such a drastic change could signal a reduction in consumer spending, further pressuring Celsius’s revenue. However, there is a silver lining with international sales showing a 37% yearly increase, suggesting potential for recovery if global distribution can be effectively expanded.

Valuation Insights
Despite the negative trends in revenue and net income, Celsius has a price-to-earnings (P/E) ratio of 35 and a forward P/E ratio of 27. These valuations may suggest optimism about a future recovery, as valuations do not usually remain low if growth prospects are restored.

Investors facing potential stock purchasing decisions should weigh the recent performance and concerning trends against the potential for international growth and improving distributor relations. The significant drop could represent a valuable buying opportunity, although risks remain regarding consumer engagement and local sales recovery.

Stocks: CELH