Celsius Holdings, Inc. (CELH) received a downgrade from BofA Securities analyst Jonathan Keypour, who changed the stock’s rating from Buy to Neutral. However, Keypour maintained the forecast for CELH at $65.
The reason behind the downgrade is the unexpected decline in the company’s market share, which is still lower compared to its peak in August. This decline, coupled with uncertainty surrounding sales growth, has affected the stock’s risk/reward profile. Previously, CELH had been benefitting from the momentum of its distribution deal with PepsiCo, Inc. (PEP).
While the company’s U.S. sales remain strong and offer significant growth opportunities, recent market share and velocity declines raise concerns. It is unclear whether these declines are seasonal or indicative of a larger issue.
Competition is another factor affecting CELH’s growth potential. Monster Beverage Corporation (MNST) is expanding its Reign Storm brand and trying to reclaim lost distribution for Bang. Additionally, Red Bull continues to maintain strong marketing efforts. With these competitors in the market, CELH may face challenges in achieving its growth targets this year.
As a result of moderating Nielsen data, Keypour lowered the fourth quarter sales estimate from $351 million to $341 million. The adjusted EBITDA is now projected to be $55.0 million, down from the previous estimate of $56.7 million.
Keypour also highlighted a lack of differentiating innovation and heightened competition as potential hurdles for CELH to meaningfully expand its market share. Despite these challenges, the analyst still sees strong sales and EBITDA potential for the company. However, Keypour is waiting for stronger velocity to signal a resumption of momentum in market share gains.
In terms of stock performance, CELH shares were trading lower by 12.38% at $52.21 as of the last check on Friday.
In conclusion, the downgrade of Celsius Holdings, Inc. by BofA Securities analyst Jonathan Keypour reflects concerns about the company’s declining market share and uncertainty surrounding sales growth. With heightened competition in the energy drink market, CELH faces challenges in expanding its market share. However, strong sales and EBITDA potential still exist for the company, and the analyst will be monitoring velocity as an indicator of future market share gains.
