If you’re looking for a consumer stock that could be a millionaire maker, one of the top stocks to consider is Celsius Holdings (NASDAQ: CELH). The reason why is quite simple — rival Monster Beverage turned out to be one of the best-performing stocks over the past three decades.
With Celsius having a tough year in an otherwise strong market, could this be an opportunity to jump into a stock with a lot of long-term potential? Let’s take a look to see if Celsius has monster potential to be the next millionaire-maker energy drink stock.
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The energy drink market is dominated by two companies at the moment: Monster Beverage and Red Bull. Within the U.S., Red Bull holds about a 35% market share, while Monster is over 29%. Celsius has been able to take the No. 3 spot with about a 9% share.
Before this year, the company was helping power the growth of the energy drink category in the U.S. It went from about 1% market share in the U.S. in early 2021 to about 4% toward the fall of 2022, when it signed a new distribution deal with PepsiCo. That deal powered the company’s market share all the way up to 9% before the end of 2023.
Celsius’ success stemmed from being able to attract a wider demographic (most notably women) to the category in what had largely been a male-dominated market. It did this with its sleek can design, sugar-free varieties, refreshing flavors, and a “healthier for you” marketing message. As such, while consumers of most energy drinks tend to be male, Celsius has been able to obtain a 50/50 male-female split in its consumers. It has also positioned the beverage to be consumed at any time, not just around workouts, while touting its weight-loss characteristics.
While the company has still seen growth, its market share has settled into the 9% range as it has become fully distributed in the U.S. Part of the problem has been general energy drink category weakness, which has stemmed from traffic woes related to the convenience store space. Energy drinks are often more spontaneous purchases and weak traffic in this important channel has hurt overall growth.
Not surprisingly, Celsius has also seen increased competition given its success. Both Monster and Red Bull have also introduced sugar-free flavors aimed more toward a broader set of customeers, while upstarts such as Alani Nu have gone after the Celcuis’ segment energy drink market as well.
This all helped lead to decelerating growth for Celsius this year, which pushed down its stock. Its year got worse in Q3 when it reported a 31% decline in sales due to an inventory mismatch at its largest distributor, PepsiCo. It said that the gap between sell-in and sell-through was narrowing but that it would still impact Q4.
Not all is dire for Celsius moving forward, though. The brand is very popular with younger consumers, especially teens. In a fall Piper Sandler teen survey, the brand was much more popular among the teen demographic than its overall market share. This should bode well for Celsius in the years ahead.
The big opportunity for the company, though, is international expansion. Monster Beverage and Red Bull both have large international presences through Europe and Asia, while Celsius is largely just starting to dip its toes into international markets. It entered the Swedish market back in 2009 and holds about a 10% market share in that country.
With only 7% of its sales coming from international markets compared to more than 35% for Monster, this is a huge potential runway for the company. However, it will need to find strong international distribution partners, as PepsiCo doesn’t have the same massive international distribution network as Coca-Cola, which distributes Monster.
Image source: Getty Images.
Celsius has a big opportunity ahead with international expansion, while the U.S. market should begin to see some improvement after a poor year for the energy drink category overall. Meanwhile, the company has gained some shelf space for 2025 and has been innovating with new flavors and beverage lines, including entering the more male-dominated 16-ounce category with its Celsius Essentials line.
The company thinks that as energy drinks become increasingly sugar-free it can also start to capture more market share. Celcius recently acquired co-packer Big Beverage, which did much of Celcius’ production. Bringing more production and packaging in-house gves Celsius production flexibility to start introducing limited-time offerings. Rival Alani Nu has seen a lot of success doing this, so this is a nice opportunity as well.
From a valuation standpoint, Celsius currently trades at a forward price-to-earnings (P/E) ratio of just above 28 times based on next year’s estimates, which is similar to Monster’s forward multiple. However, it should have a much longer growth runway given its smaller size and low penetration in international markets.
CELH PE Ratio (Forward 1y) data by YCharts
If Celsius can grow into the size of Monster, it has 8x potential from a market cap perspective (with a $6.3 billion market cap versus $50.4 billion for Monster). So you’d need a pretty large investment to turn that into a million dollars. Meanwhile, it will be difficult for Celsius to increase its market share to a similar rate as Monster.
But while Celsius likely won’t be a millionaire maker by itself, the stock should have solid upside from here given its international upside, a potential rebound in the U.S., and an attractive valuation. As such, the beverage stock could be a solid addition to investors’ portfolios.
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Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Celsius and Monster Beverage. The Motley Fool has a disclosure policy.
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