Is Celsius Finally a Buy at These Levels?



Celsius Holdings (CELH) Pre-earnings Analysis

Shares of Celsius Holdings, the parent company of the popular fitness and energy drink Celsius, have tumbled nearly 50% this year, leaving investors puzzled as to how a fast-growing company could lose so much market value. The answer likely lies in its valuation: Celsius had reached a peak market cap of around $23 billion earlier in the year, suggesting that expectations for its earnings growth were already factored into its price.

Now Celsius trades around a $7B market cap, a much more reasonable valuation relative to its $1.32B annual revenue (2023). Celsius has consistently grown revenue by over 100% annually for the past three years and is on track to continue that pace this year. Alongside this revenue growth, the company has steadily increased net income, with profits for the first two quarters of 2024 jumping by 89% and 55%, respectively. This strong financial performance, paired with a more realistic valuation, places CELH in a promising position.

Despite these impressive fundamentals, Celsius stock has lagged behind the broader market, steadily declining since March. Investors seem unable to shake the “overvalued” label that once hovered over CELH. Reflecting this sentiment, 15% of Celsius’s shares are currently sold short, with many traders betting against the company. While some may view Celsius’s rapid growth as a passing trend, the company’s sustained expansion challenges that perspective.

Coming into these earnings, CELH has a chance to once again prove itself to its doubters. The company has been stuck around 28.00-31.00 for weeks now, so maybe earnings could finally give it a nudge.

Option chain analysis:

CELH’s option chain expiring on November 15th currently reflects an implied volatility reading of 131%, which translates to about a (+/-) $5.62 move from the underlying stock. The direction of that move depends on the earnings outcome.