On Wednesday, Stifel adjusted its outlook on Celsius Holdings (NASDAQ:CELH), reducing the price target to $85 from the previous $95, while sustaining a Buy rating on the stock. The firm's assessment of retail scanner data and untracked sales channels indicates that consumer demand is likely surpassing the market's sales projections for the first and second quarters of 2024. However, concerns have been raised regarding the potential impact on reported sales for the first quarter of 2024.
The adjustment in sales forecasts is attributed to the timing of shipments to PepsiCo (NASDAQ:PEP) distributors and alterations in how promotional allowances are accounted for under the revised PepsiCo distribution agreement. Stifel notes that a comparison to the prior year's significant inventory build-up for PepsiCo distributors, estimated between $20 million and $25 million, might affect sales comparisons for the first quarter of 2024. Additionally, an expected rise in promotional allowances could diminish net sales for the same period.
Despite these near-term risks, Stifel remains optimistic about the underlying consumer demand for Celsius products. The firm anticipates that the brand will continue to capture market share within the energy category once these temporary hurdles are overcome. It was also mentioned that although sales velocities are decelerating due to more difficult year-over-year comparisons, they are still considered more robust than initially feared.
Stifel suggests that any potential weakness in Celsius's stock price following the release of the first-quarter 2024 results could present a buying opportunity for investors. The revised price target of $85 reflects the firm's caution due to the increased short-term risks, yet it maintains a positive long-term stance on the company's performance.
InvestingPro Insights
As Stifel revises its outlook on Celsius Holdings, it's essential to consider key financial metrics and analyst insights that can impact investor decisions. According to InvestingPro data, Celsius boasts a substantial market capitalization of $16.86 billion and has displayed impressive revenue growth of 101.65% over the last twelve months as of Q1 2023. This growth is supported by a robust gross profit margin of 48.04%, reflecting the company's ability to maintain profitability despite scaling operations.
InvestingPro Tips highlight that Celsius holds more cash than debt on its balance sheet, signaling financial stability and providing the company with flexibility for future investments or to weather economic downturns. Analysts also anticipate further sales growth in the current year, reinforcing Stifel's positive outlook on consumer demand for Celsius products. Additionally, the company's strong return on assets at 16.44% underscores efficient use of capital, which is a positive indicator for potential investors.
For those considering an investment in Celsius Holdings, it's worth noting that there are 19 additional InvestingPro Tips available at https://www.investing.com/pro/CELH. These insights could further inform your investment strategy. Moreover, users can take advantage of an exclusive offer by using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, enriching their investment toolkit with valuable data and analysis.
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