LOS ANGELES, CALIFORNIA – OCTOBER 17: Sponsor Alani Nu presentation during Los Angeles Fashion Week … [+] powered by Art Hearts Fashion at The New Mart on October 17, 2024 in Los Angeles, California. (Photo by Mark Gunter/Getty Images for Art Hearts Fashion)
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The energy drink company – Celsius Holdings (NASDAQ: CELH) — recently released its Q4 results, with earnings of $0.14 per share on sales of $332 million, compared to the consensus estimates of $0.10 and $327 million, respectively. The company also revealed plans to purchase Alani Nu, a wellness brand known for its energy drinks, supplements, snacks and other lifestyle products. Celsius is paying a 2.8x revenue multiple for Alani Nu in a $1.65 billion deal, based on Alani Nu’s sales of around $595 million in 2024. CELH stock reacted strongly to the acquisition news, surging 35% in after-hours trading.
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CELH stock, with -53% returns since the beginning of 2024, has underperformed the S&P 500 index, up 28%. A loss in market share in the U.S. last year weighed on its stock price. If you are looking for an upside with a smoother ride than an individual stock, consider the High-Quality portfolio, which has outperformed the S&P, and clocked >91% returns since inception.
How Did CELH Fare In Q4
Celsius’ Revenue of $332 million in Q4 was down 4.4%, primarily due to expanded distributor incentives and domestic allowance increases. While North American revenue dropped 6% to $312 million, international sales grew 39% to $20 million. In U.S. retail outlets with convenience stores, sales increased 2%, though the company’s dollar share decreased by 0.5% during the period.
While the company’s sales were lower, its gross margin expanded by 240 bps to 50.2% in Q4. Its adjusted EBITDA margin was up by a modest 10 bps to 18.9%. The company’s adjusted earnings of $0.14 per share was down 18% y-o-y.
Looking forward, with Alani Nu’s acquisition, Celsius will likely expand its market share and the combined sales are expected to top $2 billion. The company also expects synergies of $50 million in two years.
What Does This Mean For CELH Stock?
Celsius’ stock performance has been volatile in 2024, dropping 56% from $59 to $26 over the course of the year. Even if we look at a slightly longer timeframe, the changes in CELH stock over the recent years have been far from consistent, with annual returns being considerably more volatile than the S&P 500. Returns for the stock were 48% in 2021, 40% in 2022, 57% in 2023, and -52% in 2024.
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In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, is considerably less volatile. And it has comfortably outperformed the S&P 500 over the last four-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.
Given the current uncertain macroeconomic environment around rate cuts and ongoing trade wars, could CELH face a similar situation as it did in 2024 and underperform the S&P over the next 12 months – or will it see a strong jump? From a valuation perspective, there seems to be room for growth in CELH stock.
At its after-hours price of $35, Celsius Holdings is valued at 6x sales – below its three-year historical average of 9x. Given the upbeat Q4 performance, better profit margins, and the strategic Alani Nu acquisition, we believe the stock deserves a higher valuation multiple. We think that despite today’s 35% surge, the stock may have further upside potential.
CELH Return Compared With Trefis Reinforced Portfolio
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