Because of how inflation in the U.S. economy has been headed lately, it isn’t consumer discretionary stocks that tend to call on the market’s attention, but rather the artificial intelligence-drunk technology names, the likes of NVIDIA Co. NASDAQ: NVDA and others. However, there are a few gems to be picked by those who are brave enough to consider them.
$62.48 +0.58 (+0.94%) (As of 06/21/2024 ET)52-Week Range$45.03▼$99.62P/E Ratio68.66Price Target$84.64
One such gem can be potentially found in energy drink Celsius Holdings Inc. NASDAQ: CELH, which has rallied by over 10% in the past week on news of a respected Wall Street firm boosting the company’s stock price higher from previous ratings. Wall Street analysts don’t often stick their necks out when valuing and rating stocks, as their reputations could take a hit if they are wrong.Get PepsiCo alerts:Sign Up
This is why the recent boost matters more for investors, as shares of Celsius have traded down to only 64% of their 52-week highs, even with the recent double-digit rally. Do not worry; this means good news for investors looking to buy at a discount. But before blindly purchasing a beaten-down stock on an analyst boost, here’s why Celsius could be worth a second look.
Celsius Stock Leadership Available at a Discount for Investors
Despite its recent decline, Celsius remains a top stock in the beverage industry, especially in the key metric investors prioritize.
Overall MarketRank™4.43 out of 5 Analyst RatingModerate Buy Upside/Downside35.5% Upside Short InterestHealthy Dividend StrengthN/A SustainabilityN/A News Sentiment0.40 Insider TradingSelling Shares Projected Earnings Growth30.84% See Full Details
Compared to peers like Monster Beverage Co. NASDAQ: MNST and others in the caffeinated drinks space like Starbucks Co. NASDAQ: SBUX, Celsius takes the top spot.Wall Street expects Celsius stock’s earnings per share (EPS) to grow by as much as 29.6% in the next 12 months, a rate above Monster’s projections for 14.8%. Regarding Starbucks’ 12.5% expectations, Celsius also takes the lead.
Because EPS is still looking to grow above the industry average, and considering today’s discounts relative to the stock’s previous highs, analysts at Piper Sandler saw it fit to slap a $90 price target on Celsius stock, daring it to rally by nearly 50% from where it sits today.
Even though going bullish on a beaten-down stock can be an eventual successful call, there must be another reason behind these analysts’ willingness to take the contrarian view; here are a few.
Celsius’s Potential to Double Market Share Excites Investors
According to research done by Jefferies Financial Group, Celsius stock could double its current market share by the end of 2025. Celsius currently holds 4.9% of the U.S. energy drink market, but that share could increase to 8% to 9% in the next 12 months.
These predictions are supported by the fact that Celsius landed a deal with PepsiCo Inc. NASDAQ: PEP, creating a path for the brand to start achieving further economies of scale, which is likely to translate into better-than-expected EPS growth.
Digging into the company’s latest quarterly earnings results, Jefferies’s predictions start to take on water. Revenues grew by an astonishing 36.8%, a rate that discredits how cheap the stock has become in recent months.
More importantly, free cash flow (operating cash flow minus capital expenditures) stood above breakeven in the quarter, closing in at a rate of $130.1 million. Suppose Celsius can remain a positive free cash flow business. In that case, it is a matter of time before investors start reaping the benefits of buying a company in its early stages.
Strong Market Confidence in Future Upside for Celsius Stock
Markets agree with this stance, as they are willing to pay a premium for future earnings over all other peers in the beverage sector. A forward P/E ratio of 43.3x puts Celsius roughly 80% above Monster’s 24.0x valuation today.
However, premiums don’t stop there as Celsius stock trades at a 55.4x price-to-book (P/B) multiple, significantly above the rest of the beverage industry’s average valuation of 28.0x.
Stocks don’t usually trade at such high valuations unless markets have a good reason to believe their future financials to be anything but expanding, and investors now have several reasons to justify these premiums today.Before you consider PepsiCo, you’ll want to hear this.MarketBeat keeps track of Wall Street’s top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on… and PepsiCo wasn’t on the list.While PepsiCo currently has a “Moderate Buy” rating among analysts, top-rated analysts believe these five stocks are better buys.View The Five Stocks Here Click the link below and we’ll send you MarketBeat’s guide to pot stock investing and which pot companies show the most promise. Get This Free Report
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