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Morgan Stanley maintains Celsius stock at Equalweight

EditorAhmed Abdulazez Abdulkadir
Published 25/06/2024, 16:22

On Tuesday, Morgan Stanley reaffirmed its Equalweight rating on shares of Celsius Holdings (NASDAQ:CELH), with a steady price target of $68.00. The firm observed that Celsius' year-over-year sales growth has decelerated recently, and its market share has decreased to 9.6% in the latest week, down from 10.0% three weeks prior and 10.7% in early May.

Additionally, the company's velocity, which measures the rate at which products are sold, fell into the mid-teens year-over-year in the last two weeks and low double digits in the last four weeks.

Celsius Holdings' sales were up by 20% in the most recent week and 27% over the last four weeks, marking a slowdown in both year-over-year and two-year average sales growth. This trend was noted for the two-week period ending June 15, 2024. Despite ongoing promotions and gaining new shelf space, the percentage of Celsius' sales on promotion has seen a sequential drop in the last two weeks. Concurrently, the decline in year-over-year price/mix has moderated from mid-single digits to low single digits.

The velocity of Celsius' products, a key metric of the company's performance, has notably decreased, with mid-teens year-over-year declines in the last two weeks and low double-digit declines over the last four weeks. The two-year average velocity growth has also slowed to low single digits.

Morgan Stanley pointed out that while Celsius has a robust potential for growth in the U.S. through increased items per store, improved placements in coolers, and expansion in non-tracked channels, the company is facing challenging comparisons in the upcoming quarters as it cycles through the distribution and velocity growth stemming from the beginning of its distribution partnership with PepsiCo (NASDAQ:PEP).

Morgan Stanley's stance on Celsius Holdings remains cautious due to the anticipated difficult comps over the next several quarters, which are a result of cycling the distribution and velocity growth since the PepsiCo distribution began. The firm has recently lowered its second-quarter and full-year 2024 estimates for Celsius, citing PepsiCo's inventory reduction and softening category and market share trends.

In other recent news, Celsius Holdings has seen a variety of adjustments in analyst projections and price targets following inventory reductions by PepsiCo, its main distributor. Truist Securities initiated coverage on Celsius, setting a Hold rating and a $60 price target. The firm predicts a year-over-year revenue increase of 24.3% to $1.638 billion in FY24, with growth expected to continue in subsequent years. However, this outlook is more conservative than the consensus, except for the FY24 EBITDA figure.

Maxim Group, while maintaining a Buy rating, lowered its price target to $90 from $110. This adjustment was due to inventory reductions by PepsiCo and a slight decline in several of Celsius's performance metrics. Similarly, Roth/MKM and TD Cowen maintained their Buy ratings but decreased their share price targets.

Piper Sandler confirmed its Overweight rating on Celsius with a steady price target of $90, citing the company's potential for sustained sales growth. The firm revised its sales forecast for 2024 and 2025 due to PepsiCo's inventory adjustments, but remains confident in Celsius's growth trajectory.

InvestingPro Insights

As Morgan Stanley provides a measured outlook on Celsius Holdings, current InvestingPro data sheds additional light on the company's financial health and market position. Celsius Holdings boasts a substantial market cap of $13.93 billion and has experienced impressive revenue growth over the last twelve months, with an increase of 81.22%. This aligns with analyst expectations of continued sales growth in the current year, suggesting that the company's expansion trajectory remains strong despite recent deceleration.

InvestingPro Tips highlight that Celsius is trading at a high Price / Book multiple of 41.19, indicating that investors may be expecting high growth rates and profitability in the future. Additionally, the company's robust gross profit margin of 49.62% demonstrates its ability to maintain profitability amidst growing revenues. It's important to note that while the stock has experienced volatility, with a 37.18% drop over the last month, Celsius maintains a strong financial position with liquid assets exceeding short-term obligations, a reassuring sign for investors concerned about the company's immediate liquidity.

For readers looking to delve deeper into Celsius Holdings' financials and market prospects, there are additional InvestingPro Tips available, providing a comprehensive analysis of the company's position. Use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro, where you can access a full suite of insights and metrics to inform your investment decisions.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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