The boom in artificial intelligence (AI) has increased Nvidia to new heights. ‘Magnificent Seven’ stock has risen 27,310% over the past ten years, making it one of the most valuable companies in the world.
But there is a much smaller company that has done even better. I’m talking about Celsius (NASDAQ: CELH). This liquor stock has skyrocketed 27,360% over the past decade (as of June 25), turning a $10,000 investment into a staggering $2.7 million.
Let’s take a closer look at Celsius’ meteoric rise to a $13 billion company today. By looking at things with fresh eyes, investors can assess whether the stock is a smart buying opportunity.
Energetic growth
When you see a stock that has risen as much as Celsius, it’s worth taking the time to figure out what factors led to such a strong performance. In this case, it should come as no surprise that the main driver of Celsius’s rise has been its incredible revenue growth.
Only Red Bull and Monster Potionthe company has become the third largest seller of energy drinks in the US. In 2023, Celsius reported revenues of $1.3 billion. That figure was 102% higher than the year before. And it represented an impressive 25-fold increase from just five years ago.
While the broader non-alcoholic beverage industry may be extremely mature, the energy drink category is registering faster growth. Perhaps consumers aren’t as interested in drinking sugary drinks as they were 10 or 20 years ago. Or perhaps there’s simply a greater focus on drinks that are supposedly healthier for you.
This is what Celsius wants to be. By marketing its products as functional beverages that have certain health benefits, the company has steadily gained consumer attention. Every consumer-facing brand should strive to do just this.
Celsius has also benefited from bringing its drinks to more customers. This means expanding its presence in different retail environments. The company is also seeing tremendous success Amazonan extremely popular e-commerce site that attracts billions of visitors every month.
And with the help of PepsiCoAs Celsius’ domestic and international distribution partner, this company is well positioned to continue its success.
Is it too late to buy Celsius stock?
Since hitting their all-time high in March of this year, Celsius shares have been on a tear, dropping 42% in less than five weeks. On May 28, Dara Mohsenian, a research analyst at Morgan Stanleypublished a report stating that the company’s sales fell sequentially in the week ending May 18, causing Celsius’ market share to decline slightly.
But even after the monumental drop, I still believe Celsius is an overvalued stock. It trades at a price-to-earnings ratio of 61.6. That’s a high valuation to pay, especially as sales slow. And I think it’s giving potential investors zero safety margin.
Celsius is expected to grow sales by 31% annually between 2023 and 2026. This is a far cry from the triple-digit growth that investors have probably become accustomed to.
What also worries me is that these projections could prove to be too optimistic. Celsius has likely already taken advantage of the so-called low-hanging fruit opportunity with its Pepsi deal. Moreover, the sector has virtually no barriers to entry. There’s nothing stopping a well-funded entrepreneur from starting his or her own energy drink company that consumers can turn to.
Celsius has undoubtedly been a fantastic investment over the past decade, turning a small amount into nearly $3 million. But the stock doesn’t seem like a smart buying opportunity today.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Neil Patel and his clients have no position in any of the stocks mentioned. The Motley Fool holds positions in and recommends Amazon, Celsius, Monster Beverage, and Nvidia. The Motley Fool has a disclosure policy.
1 Beautiful Stocks That Turned $10,000 Into $2.7 Million was originally published by The Motley Fool
