Step Aside Wonka, Celsius Stock Is the New Fizzy Lifting Drink

It’s not just the water that’s sparkling at Celsius Holdings (CELH 10.78%) these days. The fast-growing distributor of functional beverages posted blowout financial results after Tuesday’s market close, and it could be a long time before this fizzy fave goes flat again.

The stock was already up 144% since bottoming out exactly three months ago. Triple-digit revenue growth and a bar-raising deal with pop star PepsiCo can do wonders for a stock’s effervescence. With Celsius’ unique proposition — a line of flavored canned beverages that claim to help active drinkers burn calories by improving near-term metabolism rates — this could be a financial workout that works out. 

A golden ticket

It’s not just Celsius stock making big moves. Revenue soared 137% to $154 million in the second quarter, and that’s actually underselling the bubbly octane. Celsius has been pulling back its distribution overseas, and international sales shrank from 20% in the first half of last year to just 6% of the revenue mix this time around. North America sales — again, accounting for 94% of this year’s business — skyrocketed 171% for the three months ending in June.

Margins contracted, but net income still popped nearly 12-fold to hit $9.2 million or $0.12 a share. This is the third quarter in a row that Celsius has landed well ahead of Wall Street’s bottom-line forecast, as analysts were only holding out hope for earnings of $0.08 a share. Those same pros were also likely feeling generous in targeting 129% top-line growth.

Accelerating growth is a thing of beauty, especially when you don’t see it coming. Revenue has now risen 150% through the first half of this year when stacked against the first six months of last year. Celsius is revving up in a hurry:

  • 2019: 43% revenue growth.
  • 2020: 74% revenue growth.
  • 2021: 140% revenue growth.

This kind of heady growth isn’t sustainable, and no one expects Celsius to come through with 150% revenue growth for the second half of this year. However, there’s clearly something to Celsius defining a new category at the intersection of functional and energy beverages. 

What if it’s still early in the disruption? Last week Celsius struck a strategic partnership with PepsiCo. The beverage behemoth invested $550 million in Celsius convertible preferred stock, giving it an 8.5% stake in the company and a seat on the board. PepsiCo is now Celsius’ primary distribution partner in the U.S. and its preferred option internationally. Celsius has done a great job of growing its business, at least stateside. Now it has a globetrotting icon that will make it easier to scale and gobble up market share worldwide. 

The current quarter is already off to a strong start. Nielsen scan data from mid-July shows Celsius sales up 143% year over year for the four previous weeks. The energy category is only growing at an 8% clip. Celsius is shaking things up in the sleepy realm of beverage stocks. The risks are real in a world of fickle tastes, but you don’t bet against monster growth when some catalysts for future gains are just starting to carbonate. Celsius has had a spectacular run over the past three months, but things could be just getting started. 

Rick Munarriz has positions in Celsius Holdings, Inc. The Motley Fool has positions in and recommends Celsius Holdings, Inc. The Motley Fool has a disclosure policy.

Leave a Reply

Your email address will not be published. Required fields are marked *