Celsius Stock: Analysts Remain Bullish Despite Recent 30% Dip

Quality of Earnings Report

Celsius Holdings, Inc. (NASDAQ: CELH)

Date: June 17, 2025

Executive Summary

This Quality of Earnings (QoE) report assesses Celsius Holdings, Inc. ("Celsius" or "the Company"), a rapidly growing global company in the functional beverage sector. Despite potential market volatility, including scenarios like a hypothetical 30% stock price decline, analyst sentiment often remains bullish due to Celsius's exceptional revenue growth, expanding market share, improving profitability, and strategic partnerships, notably with PepsiCo.

Our analysis indicates strong underlying earnings quality driven by robust consumer demand and operational leverage. Key strengths include a differentiated product, effective marketing, and a scalable distribution network. However, risks associated with intense competition, reliance on key partners, and maintaining high growth rates require ongoing monitoring. This report normalizes earnings where appropriate and evaluates the sustainability of Celsius's impressive growth trajectory.

Company Overview

Celsius Holdings, Inc. develops, processes, markets, distributes, and sells functional calorie-burning fitness beverages under the Celsius® brand name. Its core offerings include pre-exercise supplements and ready-to-drink sparkling and non-carbonated beverages. The company positions its products as "better-for-you" alternatives in the energy drink market, appealing to health-conscious consumers.

Financial Performance Analysis

Income Statement Highlights

Celsius has demonstrated explosive revenue growth over the past three fiscal years. Revenue grew from $314.3 million in FY2021 to $653.6 million in FY2022 (+108%), and further to $1,317.6 million in FY2023 (+101.6%). This trend continued into early 2024, with Trailing Twelve Months (TTM) revenue (as of Q1 2024) reaching $1,422.3 million.

Profitability has also significantly improved. After a GAAP net loss in FY2022, primarily due to substantial stock-based compensation and a one-time distributor termination fee, the company achieved strong GAAP net income in FY2023 and the subsequent TTM period.

Normalized EBITDA and Earnings Quality

To assess underlying operational profitability, Non-GAAP Adjusted EBITDA is a key metric. Celsius reported Non-GAAP Adjusted EBITDA of $59.2 million in FY2022, which surged to $306.9 million in FY2023. The TTM Non-GAAP Adjusted EBITDA (as of Q1 2024) stood at $340.0 million.

Adjustments typically include stock-based compensation, depreciation & amortization, interest, taxes, and sometimes other non-recurring items like litigation or restructuring. The significant increase in Adjusted EBITDA highlights improving operational leverage and core profitability, suggesting good earnings quality from ongoing operations.

• Strength: Consistent and significant growth in revenue and adjusted EBITDA.
• Strength: Transition to GAAP profitability showcases improving financial health.
• Note: High stock-based compensation in FY2022 significantly impacted GAAP net income but is a non-cash expense often adjusted for in normalized earnings views.

Margin Analysis

Gross profit margins have remained relatively stable and strong, hovering around 40-48%. For FY2023, the gross margin was 48.0%, and for TTM Q1 2024, it was 49.3%. Non-GAAP Adjusted EBITDA margins have shown substantial improvement, rising from 9.1% in FY2022 to 23.3% in FY2023, and 23.9% for TTM Q1 2024. This expansion indicates effective cost management and scaling benefits.

Cash Flow Analysis

Cash flow from operations has improved significantly alongside profitability. In FY2023, cash provided by operating activities was $236.4 million, a substantial turnaround from cash used in operations in prior years. This reflects strong collections and efficient working capital management as the business scales. Investing activities primarily relate to marketing equipment and international expansion. Financing activities have included equity offerings in the past to fund growth, but improved operating cash flow reduces reliance on external financing.

Business Model Assessment

Core Revenue Streams

The primary revenue stream is the sale of Celsius® branded functional beverages through a diversified distribution network, including direct store delivery (DSD) systems, club stores, grocery stores, convenience stores, drug stores, mass merchants, and e-commerce platforms.

Cost Drivers

Key cost drivers include:

• Cost of Goods Sold: Raw materials (ingredients, packaging), co-packing fees, and inbound freight.
• Sales & Marketing: Significant investment in brand building, advertising, sponsorships, and trade promotions.
• Distribution Costs: Logistics, warehousing, and fees paid to distributors.
• General & Administrative: Personnel, infrastructure, and corporate overhead.

Scalability and Sustainability

The business model has proven highly scalable, particularly with the strategic distribution agreement with PepsiCo initiated in 2022. This partnership significantly expanded Celsius's reach in North America. Sustainability of growth depends on continued product innovation, effective marketing, maintaining strong distributor relationships, and successful international expansion. The shift towards health and wellness beverages supports long-term demand.

Key Operational Risks and Dependencies

• Competition: The beverage industry is intensely competitive, with established players like Monster Beverage and Red Bull, as well as emerging brands.
• Distributor Reliance: Heavy reliance on key distributors, particularly PepsiCo in North America. Any disruption to this relationship could impact sales.
• Supply Chain: Susceptibility to fluctuations in raw material costs and potential supply chain disruptions.
• Brand Reputation: Maintaining a positive brand image and navigating health-related claims and regulations.
• International Expansion Risks: Challenges in adapting to new markets, local regulations, and consumer preferences.

Growth Trajectory Evaluation

Historical Growth Rates and Drivers

Celsius has experienced phenomenal organic growth, consistently delivering triple-digit or high double-digit revenue growth year-over-year. Key drivers include:

• Growing brand awareness and consumer adoption.
• Expansion of distribution channels, especially through the PepsiCo network.
• Product innovation and line extensions catering to evolving consumer tastes.
• Effective marketing campaigns targeting fitness enthusiasts and health-conscious individuals.

Future Growth Potential

Analysts often cite several factors for continued bullishness on Celsius's future growth:

• Further U.S. Market Penetration: Opportunity to gain more shelf space and market share within the U.S. energy drink and functional beverage categories.
• International Expansion: Significant untapped potential in international markets. Celsius has been making strategic moves to expand globally.
• Product Innovation: Continued development of new flavors and product lines to attract new customers and retain existing ones.
• Leveraging PepsiCo Partnership: Deeper collaboration and synergy with PepsiCo's extensive distribution and marketing capabilities.

Even after a hypothetical 30% stock price correction, these underlying growth drivers would likely remain intact, potentially making the valuation more attractive for long-term investors if the drop is perceived as market-driven rather than due to fundamental business deterioration.

Benchmarking

Compared to mature competitors like Monster Beverage and Red Bull, Celsius is in an earlier, higher-growth phase. While its absolute revenue is smaller, its growth rates have significantly outpaced industry averages. Its valuation multiples (e.g., Price/Sales, EV/EBITDA) are often higher, reflecting market expectations for continued rapid expansion. The key is for Celsius to sustain premium growth to justify these multiples.

Quality of Earnings Assessment

Revenue Recognition

Revenue is primarily recognized when control of the products is transferred to customers, generally upon shipment or delivery. Policies appear standard for the industry. Volume-based rebates and promotional allowances are accounted for as a reduction of revenue.

Expense Recognition

Costs of goods sold are recognized concurrently with revenue. Operating expenses, particularly sales and marketing, are substantial and reflect investments for future growth. Stock-based compensation has been a significant non-cash expense, particularly in FY2022, impacting GAAP net income but not cash flows to the same extent.

Working Capital Movements

As sales have surged, accounts receivable and inventory have naturally increased. Effective management of working capital is crucial. The company has generally managed its cash conversion cycle well, supported by its improved operating cash flows. The PepsiCo agreement also influences working capital dynamics, potentially streamlining some aspects.

Potential Red Flags & Areas for Further Due Diligence

• Sustaining High Growth: The law of large numbers makes it harder to maintain triple-digit growth as the revenue base expands. Future due diligence should scrutinize growth sustainability.
• Concentration Risk: While beneficial, the reliance on PepsiCo for a significant portion of distribution creates a concentration risk.
• Competitive Response: Incumbents may react more aggressively to Celsius's market share gains.
• Valuation Sensitivity: High-growth stocks can be sensitive to changes in growth expectations or market sentiment.

Analyst Outlook & Bullish Thesis (Post Hypothetical 30% Stock Drop)

Many analysts have maintained a bullish outlook on Celsius, even during periods of stock price volatility or significant pullbacks. The rationale behind this sustained optimism, even hypothetically after a 30% drop, generally revolves around:

1. Exceptional Fundamental Growth: Continued strong top-line growth driven by volume and expanding distribution often overshadows short-term stock price movements. Analysts look at sell-through data and market share gains.
2. PepsiCo Partnership Impact: The long-term benefits of the PepsiCo distribution agreement are still unfolding, providing a clear path for continued domestic growth and improved operational efficiencies.
3. International Expansion Runway: Celsius is still in the early stages of international expansion, representing a significant long-term growth lever.
4. Brand Momentum & Product Differentiation: The brand resonates well with health-conscious consumers, a growing demographic. Its "functional, better-for-you" positioning differentiates it.
5. Improving Profitability & Scalability: Demonstrated ability to scale operations and improve margins as revenue grows, indicating a strong business model.
6. Valuation Re-Rating: A significant stock price drop, if not accompanied by a deterioration in fundamentals, can be viewed as an attractive entry point or an opportunity to add to positions, as the risk/reward profile becomes more favorable.

Analysts would typically reassess their models post-drop, but if underlying sales trends, market share data, and strategic initiatives remain on track, the core investment thesis often holds. The focus shifts to whether the market has overreacted to short-term news or broader sector concerns.

Key Financial Data

*TTM (Trailing Twelve Months) data ending March 31, 2024. Fiscal Year 2022 ended December 31, 2022. Fiscal Year 2023 ended December 31, 2023. Financial data sourced from company filings and financial data providers. Non-GAAP Adjusted EBITDA is as reported by the company.

Financial Performance Chart

Conclusion and Key Considerations

Celsius Holdings, Inc. presents a compelling growth story characterized by rapid revenue expansion, improving profitability, and strong brand momentum. The quality of its earnings appears robust, driven by genuine consumer demand and operational improvements. The strategic partnership with PepsiCo is a significant catalyst that continues to fuel growth in North America, while international markets offer substantial long-term potential.

Despite the inherent risks of a high-growth company operating in a competitive landscape, the underlying fundamentals provide a strong basis for analyst bullishness, even in the face of market volatility or stock price corrections. Key areas for ongoing due diligence include monitoring the sustainability of its high growth rates, competitive dynamics, execution of international strategy, and management of its key distributor relationships.

A hypothetical 30% drop in stock price, if not tied to a fundamental degradation of the business, would likely be seen by many analysts as an enhanced buying opportunity, given the company's strong performance and future outlook.

Citations

• Celsius Holdings, Inc. Investor Relations. (Various press releases, SEC Filings - 10-K, 10-Q). Retrieved from https://www.celsiusholdingsinc.com/investors/
• Yahoo Finance - Celsius Holdings, Inc. (CELH) Financials. Retrieved from https://finance.yahoo.com/quote/CELH/financials?p=CELH
• Celsius Holdings, Inc. Q4 2023 Earnings Call Transcript (example source for Adjusted EBITDA discussion). (Typically available on financial news sites or investor relations).
• Celsius Holdings, Inc. Q1 2024 Earnings Release. (Typically available on financial news sites or investor relations).
• SEC EDGAR Database for Celsius Holdings, Inc. Filings. Retrieved from https://www.sec.gov/edgar/browse/?CIK=1341072

This report is for informational purposes only and does not constitute investment advice. Financial data presented is based on publicly available information as of the latest practicable date prior to this report's issuance and is subject to change. The "current date" of this report is June 17, 2025; however, the actual financial data used is the latest available publicly verified data (typically up to Q1 2024 for TTM figures and full year 2023). Projections and forward-looking statements involve risks and uncertainties.

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