On Thursday, Jefferies adjusted its financial outlook on Celsius Holdings (NASDAQ:CELH), reducing the price target to $48 from the previous $53. The firm continues to endorse a Buy rating for the company's shares. The adjustment follows observations that Celsius Holdings' growth is decelerating, now falling behind that of competitor Red Bull. Additionally, increased promotional efforts have not effectively boosted sales volumes as anticipated.
The revision includes a significant decrease in the third-quarter sales growth estimate, now projected at a 31% decline, which marks a 9 percentage point drop from previous expectations. Operating margin forecasts have also been lowered to 1.7%, a decrease of 4 percentage points. The analyst indicates that the third quarter is influenced by multiple factors, but it is clear that demand for Celsius Holdings' products is waning.
Looking further ahead, expectations for the fourth quarter of 2024 and the full year of 2025 have been reduced by 6 and 3 percentage points, respectively. Despite the near-term challenges and a more conservative outlook, Jefferies believes the slowdown is not indicative of a long-term issue. The investment firm suggests that the current market share implies that Celsius Holdings' stock remains undervalued, reinforcing their decision to reiterate a Buy rating on the shares.
In other recent news, Celsius Holdings has experienced several noteworthy developments. The company reported a 23% increase in total revenue, hitting a record $402 million, and a 30% rise in international revenue to $19.6 million. Simultaneously, Celsius Holdings is grappling with adjustments due to inventory reductions by PepsiCo (NASDAQ:PEP), which are projected to significantly impact the company's sales and EBITDA for the third quarter and the full year of 2024.
In response to these changes, multiple financial firms, including Truist Securities, Piper Sandler, Jefferies, Roth/MKM, and BofA Securities, have revised their revenue and EBITDA estimates for Celsius Holdings. For instance, Roth/MKM adjusted its price target for Celsius to $43.00, down from $45.00, due to concerns over inventory and promotional impacts.
In addition to these financial adjustments, Celsius Holdings has witnessed significant board changes. Hans Melotte, an experienced executive from Starbucks (NASDAQ:SBUX) and Johnson & Johnson, has joined the board following Jim Lee's resignation. Lastly, Exane BNP Paribas (OTC:BNPQY) maintained its Outperform rating and $58.00 price target for Celsius Holdings, despite the aforementioned challenges.
InvestingPro Insights
Recent InvestingPro data provides additional context to Jefferies' analysis of Celsius Holdings (NASDAQ:CELH). Despite the reduced price target, the current InvestingPro fair value of $40.84 and the average analyst fair value of $48 suggest potential upside from the current price of $30.51. This aligns with Jefferies' maintained Buy rating, indicating that the stock may indeed be undervalued as suggested in the article.
InvestingPro Tips highlight that CELH is "Trading at a low P/E ratio relative to near-term earnings growth," with a PEG ratio of 0.11 for the last twelve months as of Q2 2024. This metric supports the view that the stock might be undervalued despite recent challenges. Additionally, the company's strong financial health is evident from the tip that it "Holds more cash than debt on its balance sheet."
It's worth noting that CELH has experienced significant price volatility, with the stock price falling 46.39% over the last three months and 63.88% over the last six months. This volatility aligns with the article's discussion of decelerating growth and increased promotional efforts.
For investors seeking a more comprehensive analysis, InvestingPro offers 11 additional tips for Celsius Holdings, providing a deeper understanding of the company's financial position and market performance.
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