On Tuesday, CFRA upgraded shares of Celsius Holdings (NASDAQ:CELH) from Hold to Buy, adjusting the price target to $55 from the previous $65.
The adjustment reflects a new valuation based on a price-to-earnings (P/E) ratio of 36.7 times for the year 2025, significantly lower than the company's five-year average forward P/E of 112 times. The firm maintains its earnings per share (EPS) estimates for Celsius Holdings at $1.10 for 2024 and $1.50 for 2025.
Celsius Holdings reported second-quarter earnings per share of $0.28, surpassing the consensus estimate of $0.23 and marking a 65% increase from the $0.17 reported in the same quarter last year. The company's better-than-expected performance was attributed to robust sales and expanding margins. Net sales for the quarter increased by 23% to $402 million, which was $9 million above the consensus forecast.
The company's gross margin also saw significant expansion, growing by 320 basis points to reach 52.0%, outperforming the consensus by a similar margin. This financial improvement comes after a period of underwhelming share performance, which had raised concerns among investors regarding the company's growth trajectory.
The analyst's commentary highlighted the improved risk/reward profile for Celsius Holdings at current levels, citing the company's leading growth profile within the industry.
The firm also pointed out that Celsius Holdings is only beginning to tap into its international growth potential, which saw a 30% year-over-year increase but still accounts for less than 5% of total net sales in the second quarter. The analyst believes that the market is not fully appreciating the company's potential for margin improvement.
In other recent news, Celsius Holdings has seen a series of adjustments in its financial outlook by various firms. Jefferies lowered the company's price target to $68, citing a slowdown in the business, but maintained a Buy rating.
Concurrently, Roth/MKM reduced its price target to $75 due to a broader slowdown in the energy drink sector, yet also retained a Buy rating. Morgan Stanley reaffirmed its Equalweight rating on Celsius shares, with a steady price target of $68.00, observing a deceleration in the company's sales growth and a decrease in market share.
Truist Securities initiated coverage on Celsius with a Hold rating and a price target of $60, predicting a year-over-year revenue increase of 24.3% to $1.638 billion in FY24. Maxim Group, while maintaining a Buy rating, lowered its price target for Celsius due to inventory reductions by PepsiCo (NASDAQ:PEP) and a slight decline in several of the company's performance metrics.
InvestingPro Insights
In light of CFRA's upgrade of Celsius Holdings (NASDAQ:CELH) to Buy, it's valuable to consider additional metrics and insights. According to InvestingPro data, Celsius Holdings has a current market capitalization of approximately $9.77 billion, with a P/E ratio of 45.51, suggesting a premium valuation. The company's revenue growth has been impressive, with an 81.22% increase over the last twelve months as of Q1 2024, highlighting its strong sales performance.
Two InvestingPro Tips that are particularly relevant to Celsius Holdings' situation are: Firstly, analysts anticipate sales growth in the current year, which aligns with the company's recent robust sales report. Secondly, the stock is trading at a high earnings multiple, which is consistent with the P/E ratio mentioned above. These insights suggest that while the company is experiencing significant sales growth, its stock valuation is on the higher side, which is a factor for investors to consider.
For those interested in a deeper analysis, there are 21 additional InvestingPro Tips available for Celsius Holdings, which can be found at https://www.investing.com/pro/CELH. These tips may offer further guidance on the company's financial health and stock performance, helping investors make more informed decisions.
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