Celsius Stock: Buy the Dip? | CELH Stock Analysis
Summary
Parkev reviews Celsius's recent financial performance, noting an 11% revenue increase but a significant drop in gross margins to 48.1% from 51.5% the previous year. Parkev highlights several headwinds, including consumer trading down to store brands at retailers like Costco and Walmart due to inflation, as well as increased promotional spending and higher commodity and shipping costs. Despite these challenges, Parkev remains optimistic, pointing to the company's scale benefits from the Rockstar transition and a $100 million share repurchase program as signs of management's confidence.
Parkev emphasizes that the stock is trading at its cheapest forward price-to-earnings ratio (12) in several years. Parkev uses a discounted cash flow model to calculate a fair value of $58 per share, which is significantly higher than the current market price of approximately $23.64. Parkev concludes that the partnership with PepsiCo and the growth of the energy drink category position Celsius well for the long term.
Mentioned Stocks
Reasoning: Parkev believes Celsius is significantly undervalued, trading at a forward P/E of 12, which is a historical low. Parkev calculates a fair value of $58 using a discounted cash flow model, which is more than double the current market price of $23.64. Despite short-term margin pressure from promotions and commodity costs, Parkev highlights the $100 million stock repurchase and the PepsiCo partnership as strong reasons for optimism and recommends adding the stock to portfolios at current levels.