Morgan Stanley Maintains Equalweight Rating on Celsius Holdings
Morgan Stanley has reaffirmed its Equalweight rating for Celsius Holdings (NASDAQ: CELH), establishing a price target of $50.00. The firm's observations indicate a modest increase in sales, with a year-over-year sales growth of 5% noted in the two weeks ending October 5, 2024, across the Nielsen xAOC+C channels. While this growth may seem limited, it reflects a slight improvement in the average sales growth over the past two years.
According to recent data, Celsius's market share, excluding powdered products, has experienced a decline of 20 basis points sequentially to settle at 9.5%. This marks a decrease from the higher market share of 10.7% noted earlier in May. However, the total distribution points (TDP) for Celsius have remained stable with mid-30% growth, while the velocity of sales has shown a minor sequential improvement, even though it still reflects a year-over-year decline of low-20%.
Another notable trend is the sequential decrease in Celsius's promotional sales percentage, although it has increased when compared to last year. Additionally, the price/mix ratio has decreased by 3% in the last two weeks, an improvement over the 5% drop observed in the previous two weeks. Moreover, the sales metrics from Nielsen's new Full View Measurement dataset, incorporating 1P sales estimates from Amazon, suggest that Celsius's sales performance is on par with other channels, despite a lower implied share on Amazon compared to alternative sources.
Financial Forecasts and Market Insights
Morgan Stanley previously adjusted its projections for Celsius, downgrading third-quarter and full-year forecasts on September 4. The adjustments were attributed to PepsiCo's inventory reductions and overall softness in the beverage category, with an additional downgrade occurring on September 23 due to promotional accounting impacts linked to PepsiCo's inventory actions. The firm has emphasized the absence of a clear catalyst for Celsius until scanner data trends show positive movement.
Celsius Holdings recently disclosed a remarkable 23% rise in total revenue, achieving a record high of $402 million. International revenue reported a notable 30% increase to $19.6 million. However, the anticipated inventory reductions from PepsiCo are expected to have a significant impact on both sales and EBITDA for the upcoming third quarter and the full year of 2024. In light of these developments, various financial institutions, such as Piper Sandler, Jefferies, and Roth/MKM, have revised their price targets for Celsius Holdings, acknowledging the updated financial outlook. Piper Sandler has maintained its Overweight rating, reducing its price target from $50 to $47, while Jefferies and Roth/MKM set their targets at $48 and $43 respectively.
Strategic Board Changes and Growth Projections
Stifel financial services maintains a positive outlook for Celsius Holdings, indicating expectations for enhanced sales within convenience stores by 2025. This optimistic perspective coincides with recent significant changes within the company’s board, highlighted by the appointment of Hans Melotte—an experienced professional from Starbucks and Johnson & Johnson—who joins the board following Jim Lee's resignation.
Insights on Revenue Growth and Stock Performance
Recent InvestingPro insights underscore the context of Morgan Stanley's analysis concerning Celsius Holdings (NASDAQ: CELH). Despite noted slower growth, Celsius achieved impressive revenue growth of 56.5% over the last year, reaching a total of $1.49 billion. This robust financial performance is exhibited through a gross profit margin of 50.45% and an operating income margin of 22.42% during the same timeframe.
However, it is essential for investors to acknowledge that CELH's stock price has undergone notable volatility, with a decline of 33.84% over the past three months and a significant 52.62% drop over the last six months. This trend appears to resonate with Morgan Stanley's cautious viewpoint regarding the stock's near-term future.
Notably, Celsius is currently trading at a low P/E ratio in comparison to its expected earnings growth, highlighted by a PEG ratio of 0.13, which might suggest potential undervaluation given recent market challenges. Financially, the company is situated well, as it holds a greater amount of cash than debt on its balance sheet, indicating solid financial stability amid current uncertainties in the market.
Frequently Asked Questions
What is Morgan Stanley's rating for Celsius Holdings?
Morgan Stanley has maintained an Equalweight rating for Celsius Holdings with a price target of $50.00.
How did Celsius Holdings perform in terms of revenue?
Celsius Holdings reported a 23% increase in total revenue, reaching a record $402 million.
What challenges is Celsius facing regarding market share?
Celsius's market share, excluding powders, has declined to 9.5%, down from 10.7% earlier this year.
Are there any recent changes in Celsius's board of directors?
Yes, Hans Melotte from Starbucks and Johnson & Johnson recently joined the board after Jim Lee's resignation.
What financial outlook do analysts have for Celsius Holdings?
Several financial firms have revised their price targets for Celsius, with Piper Sandler reducing its target from $50 to $47 amid projected impacts from PepsiCo's inventory actions.
