Celsius Holdings Inc. (NASDAQ:CELH) witnessed its shares plummet by the most in over two years following indications from industry sales data suggesting a slowdown in the energy drink maker’s revenue growth.
On Tuesday, the stock nosedived by 13%, erasing approximately $2.9 billion from the company’s market capitalization. According to Morgan Stanley analyst Eric Serotta, Celsius experienced a deceleration in year-over-year sales growth in tracked US channels for the week ending May 18, compared to earlier in the month. Additionally, Serotta noted a slip in the company’s market share, excluding its powder products, along with an increase in the percentage of sales on promotion.
As Celsius relies more heavily on revenue from the US market compared to larger multinational firms, these data are viewed as a closer reflection of business trends. Wedbush Securities analyst Gerald Pascarelli explained that being a less mature company, Celsius is predominantly valued based on top-line trends and market-share gains rather than earnings.
Pascarelli cautioned against overreacting to the stock’s double-digit decline on Tuesday, attributing it to an overreaction. According to Serotta’s note, Celsius’ year-over-year sales growth in tracked US channels slowed to 39% for the week ending May 18, down from 50% for the week ending May 4.
While the current decline raises concerns, Celsius shares have still surged by over 50% this year, outperforming peers in the consumer staples sector. Analyst Jim Salera from Stephens Inc. highlighted investor worries regarding additional headwinds stemming from inventory adjustments by Celsius distributor PepsiCo Inc.
Stifel analyst Mark Astrachan cautioned that second-quarter sales could be impacted again as PepsiCo adjusts Celsius inventory levels. Such adjustments had previously weighed on Celsius sales in the first quarter. Astrachan suggested that PepsiCo might further reduce Celsius inventories, potentially resulting in second-quarter sales below-end demand.
Concurrently, shares in PepsiCo, which holds a stake in Celsius, experienced a 2.6% decline on Tuesday. Moreover, industry data has recently indicated weaker trends for PepsiCo, in contrast to its rival Coca-Cola Co.
However, Salera perceives the decline in Celsius stock as a buying opportunity. He anticipates the company to continue gaining shelf space at retailers, thereby enhancing brand visibility and supporting new household growth.
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