Celsius Holdings Inc. is a star on the stock market and, over time, has become a meme stock with a passionate following on stock market forums across the Atlantic.
The latter, it must be said, was not undeserved either: after years of struggling to get by, Celsius suddenly took off, reaching $1.3 billion in sales, compared with just $15 million ten years earlier.
Is this rapid growth sustainable, or should we fear a Zoom-like scenario? That's the question that analysts and disillusioned shareholders have been debating for the past few months. To the optimists' credit, the half-year results published in August were still strong, with sales up 29% and earnings per share soaring 77%. However, the market remained unconvinced.
In free fall, the valuation now stands at approximately 33 times last year's net income and 25 times the forecasted earnings for this year. This raises concerns, given the company's track record of growth and its impressive profitability achieved without relying on leverage.
Celsius is, in fact, only just recovering from two disappointing quarters of decline. The market is skeptical about whether this turnaround is sustainable, especially since management has issued strangely alarming warnings that PepsiCo, the Group's largest customer, continues to reduce its orders.
This is the core issue: the food giant accounts for almost two-thirds of Celsius' orders, leaving the company heavily dependent on this distribution channel and somewhat constrained in its search for other partners.
To draw a common comparison, in 2010, when Monster Beverage had sales equivalent to Celsius' today, it was far less reliant on its main customer. CCR, a Coca-Cola bottler, accounted for just over a quarter of its sales.
Those who choose to overlook the risk and see the glass as half full will point out that, following its success in the USA, Celsius is only at the beginning of its international expansion. Sales in the UK began a few months ago, and launches in France, Australia, and New Zealand are expected in the coming weeks.
The Group's shareholder base is also likely to evolve. Among the key stakeholders is the DeSantis family office, whose patriarch recently passed away, which could fuel speculation about a potential takeover. However, any buyer would need to address the company's dependence on PepsiCo.
Unless, of course, PepsiCo—which holds an 8.5% stake in Celsius—emerges as the buyer. In that scenario, a drop in valuation would be directly in its interest.
Celsius Holdings, Inc. is engaged in the development, processing, marketing, sale, and distribution of functional energy drinks to a range of consumers. The Company's flagship asset, CELSIUS, is marketed as a fitness drink or supplement which, with exercise, is designed to accelerate metabolism and burn body fat while providing energy. This product line comes in two versions: a ready-to-drink form and an on-the-go powder form. The Company also offers a new CELSIUS Essentials line, available in 16-ounce cans. Celsius products are offered in retail channels across the United States, including conventional grocery, natural, convenience, fitness, mass market, vitamin specialty and e-commerce. Additionally, the Company's products are also offered in certain Canadian, European, Middle Eastern and Asia-Pacific markets. Its product's formulation includes ingredients and supplements such as green tea (EGCG), ginger (from the root), calcium, chromium, B vitamins and vitamin C.
CELSIUS HOLDINGS, INC. 
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