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Morgan Stanley maintained its Equalweight rating on shares of Celsius Holdings (NASDAQ:CELH), with a price target of $50.00. The firm's analysis indicated that Celsius experienced a modest year-over-year sales increase of 5% in the last two weeks ending October 5, 2024, within the Nielsen xAOC+C channels. Despite the soft growth, the two-year average sales growth showed a slight improvement.
Celsius's market share, excluding powders, has seen a decline of 20 basis points sequentially, settling at 9.5%. This figure is a decrease from the 10.7% market share recorded in early May. The total distribution points (TDP) growth for Celsius remained steady in the mid-30% range, while velocity growth showed a slight sequential improvement but still reflected a low-20% year-over-year decline.
The percentage of Celsius's sales on promotion decreased sequentially, although it increased compared to the previous year. The price/mix was down 3% in the last two weeks compared to a 5% decrease in the prior two weeks. Additionally, Celsius's sales and market share in Nielsen's new Full View Measurement data set, which includes Amazon (NASDAQ:AMZN) 1P sales estimates, were reported to be similar to other channels, despite a lower implied share on Amazon compared to other data services.
Morgan Stanley had previously lowered its third-quarter and full-year 2024/2025 forecasts for Celsius on September 4, due to PepsiCo (NASDAQ:PEP)'s inventory reduction and overall category softness, and again on September 23, related to promotional accounting associated with the PepsiCo inventory drawdown. The firm reiterated its stance, not foreseeing a catalyst for Celsius until there is a positive inflection in scanner data trends.
Celsius Holdings reported a 23% increase in total revenue, reaching a record $402 million, and a 30% rise in international revenue to $19.6 million. However, inventory reductions by PepsiCo are projected to significantly impact Celsius Holdings' sales and EBITDA for the third quarter and full year of 2024. In response to these changes, multiple financial firms, including Piper Sandler, Jefferies, and Roth/MKM, have revised their price targets and revenue estimates for the company. Piper Sandler confirmed its Overweight rating but reduced the price target from $50 to $47, while Jefferies and Roth/MKM lowered their price targets to $48 and $43 respectively.
Stifel maintains a positive outlook on Celsius, predicting an improvement in convenience store sales by 2025. The company has also seen significant board changes, with Hans Melotte, an experienced executive from Starbucks (NASDAQ:SBUX) and Johnson & Johnson, joining the board following Jim Lee's resignation.
InvestingPro Insights
Recent InvestingPro data provides additional context to Morgan Stanley's analysis of Celsius Holdings (NASDAQ:CELH). Despite the soft growth noted in the report, Celsius has demonstrated impressive revenue growth of 56.5% over the last twelve months, reaching $1.49 billion. This strong performance is reflected in the company's robust gross profit margin of 50.45% and operating income margin of 22.42% for the same period.
However, investors should note that CELH's stock price has experienced significant volatility, with a 33.84% decline over the past three months and a 52.62% drop over the last six months. This aligns with Morgan Stanley's cautious stance on the stock's near-term prospects.
InvestingPro Tips highlight that Celsius is trading at a low P/E ratio relative to its near-term earnings growth, with a PEG ratio of 0.13. This could suggest potential undervaluation, despite the recent market challenges. Additionally, the company holds more cash than debt on its balance sheet, indicating financial stability amidst market uncertainties.
For investors seeking a more comprehensive analysis, InvestingPro offers 16 additional tips for Celsius Holdings, providing a deeper understanding of the company's financial health and market position.
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