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On Wednesday, BofA Securities maintained its Underperform rating on Celsius Holdings (NASDAQ:CELH) with a steady price target of $30.00, below the current trading price of $35.52. While InvestingPro data shows the company maintains strong financial health with a "GREAT" overall score, the firm’s analysis indicated that the company’s first-quarter results were more complex than expected, with challenges in assessing underlying demand due to various factors.
The analysis by BofA Securities highlighted that the comparison with the previous year’s figures was clouded by the expansion of distribution for the Essentials range. Despite maintaining a healthy gross profit margin of 50.43% and a strong current ratio of 3.38, a pull-forward of shipments into the fourth quarter of the previous year and an increase in promotional activities contributed to a larger discrepancy between scanner data and reported results than was anticipated.
BofA Securities noted a decline in scanner data of approximately 2% year-over-year up to April 19, which includes the impact of lapping a promotional event in the Club channel. Despite this, the sales decline in the remaining scanned retail channels was only slight year-over-year. The firm anticipates an improvement in year-over-year consumption as the quarter progresses. InvestingPro analysis reveals that analysts expect significant sales growth of 65% for FY2025, though the stock currently trades at a high P/E ratio of 104.33. Get access to 17 additional InvestingPro Tips and comprehensive financial analysis through the Pro Research Report, available exclusively to subscribers. However, it also expects an increase in promotional activities that may negatively affect sales in the second quarter before potentially becoming a sales driver in the second half of 2025.
The report also mentioned Alani Nu, a brand under Celsius Holdings, referring to it as a "black box" until further information is provided by the management in a yet-to-be-announced modeling call. The analysts expect inventory increases to impact Alani’s underlying gross margin, though a gross margin target of approximately 50% is still considered achievable in the future.
BofA Securities’ commentary underscores the complexities in predicting Celsius Holdings’ performance due to promotional dynamics and distribution changes, suggesting a cautious outlook for the stock in the near term.
In other recent news, Celsius Holdings Inc. reported its first quarter 2025 earnings, which fell short of analysts’ expectations. The company announced an earnings per share (EPS) of $0.18, missing the forecasted $0.20, while revenue came in at $329.3 million, below the anticipated $348.62 million. Despite the earnings miss, Celsius noted a 41% growth in international revenue and an expansion in gross margin by 110 basis points to 52.3%. The company is also focusing on new product launches and strategic acquisitions to drive future growth, including the integration of its recent acquisition, Elani Nu.
Additionally, Celsius Holdings is working on expanding its retail shelf space and improving product velocity. The company aims to enhance its presence with new product innovations and marketing campaigns set to roll out in the coming months. Analysts have noted the company’s plans to capitalize on the health and wellness trends that are driving the energy drink market. The company’s strategic moves and market positioning have prompted analysts from firms like Jefferies to inquire about its strategies for improving sales velocity.
Celsius Holdings remains optimistic about its growth prospects, with CEO John Fieldly expressing confidence in the company’s ability to lead the modern energy category. The company continues to face challenges such as competition and supply chain disruptions, but its strong international performance and strategic initiatives provide a foundation for potential growth in the upcoming quarters.
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