Celsius stock could rebound after short-term hit from PepsiCo moves - Roth/MKM

On Thursday, Celsius Holdings (NASDAQ:CELH) had its price target lowered by an analyst from Roth/MKM, citing upcoming challenges in the third quarter of 2024. The new target is set at $45.00, down from the previous $65.00, although the firm maintains a Buy rating on the stock.

The adjustment comes in response to an announcement from management that inventory reductions by PepsiCo (NYSE:NASDAQ:PEP) will have a more significant impact on the company's third-quarter revenues and margins than initially anticipated.

The analyst expressed continued optimism about Celsius Holdings' growth potential beyond the third quarter of the year but acknowledged that the overall category's softness and PepsiCo's inventory adjustments might temper investor excitement in the short term.

The revision of the price target to $45 from $65 reflects the analyst's recalibrated expectations for the company's near-term financial performance. Despite the reduced target, the analyst's stance remains positive, with the Buy rating reaffirmed.

The report highlighted the dual factors influencing the decision: the broader category's current performance and the specific actions taken by PepsiCo regarding inventory. These elements are expected to influence Celsius Holdings' financial outcomes in the upcoming quarter, prompting the analyst to adjust their price target accordingly.

The firm's maintained Buy rating indicates a belief that, while immediate headwinds are anticipated, the long-term growth trajectory for Celsius Holdings remains promising. This perspective suggests confidence in the company's ability to navigate the current market challenges and capitalize on future opportunities.

In other recent news, Celsius Holdings reported a 23% increase in total revenue, setting a record at $402 million, with a 30% rise in international revenue to $19.6 million. Despite industry challenges, Celsius maintained its category growth leadership and expanded its shelf presence.

BofA Securities adjusted its outlook on Celsius Holdings, decreasing the price target to $26.00 from the previous $32.00 and maintained its Underperform rating on the stock. This adjustment followed the company's announcement of an expected inventory drag in the third quarter of 2024, with estimates ranging between $100 million and $120 million.

Concurrently, Morgan Stanley maintained its Equalweight rating and $50.00 stock price target for Celsius Holdings due to concerns about growth. TD Cowen also revised its price target for Celsius's shares from $68.00 to $50.00, while maintaining a Buy rating.

The firm's revised projection for Celsius's 2024 sales growth stands at 19%, reflecting concerns about broader weakness in the Energy category consumption and increased promotional activities by competitors. These are recent developments in the company's financial landscape.

InvestingPro Insights

In light of the recent price target adjustment for Celsius Holdings (NASDAQ:CELH) by Roth/MKM, it's worth considering additional insights that could further inform investors. According to InvestingPro data, Celsius Holdings boasts a robust revenue growth with a notable increase of 56.5% over the last twelve months as of Q2 2024. This indicates a strong expansion of the company's top-line financials, which could be a positive signal for long-term growth potential.

Moreover, the company's P/E ratio currently stands at 31.23, which is aligned with the adjusted P/E ratio for the same period. While this valuation may seem high, the PEG ratio, which measures the P/E relative to earnings growth, is quite low at 0.14, suggesting that the stock may be undervalued based on its growth rate.

InvestingPro Tips highlight that Celsius Holdings holds more cash than debt on its balance sheet, providing a degree of financial stability. Furthermore, the stock is currently trading near its 52-week low, which might present a buying opportunity for investors who believe in the company's fundamental strengths and long-term prospects.

For those seeking more detailed analysis, InvestingPro offers additional tips on Celsius Holdings, including insights into earnings revisions, stock volatility, and liquidity. With 19 more tips available on InvestingPro, investors can gain a comprehensive understanding of the company's financial health and market position.

The combination of these metrics and tips can serve as a valuable resource for investors trying to navigate the complexities of the market and make informed decisions about Celsius Holdings' stock.

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