The artificial intelligence (AI) boom has stopped Nvidia to new heights. “Magnificent Seven” stock has soared 27,310% over the past 10 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 stock of drinks 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’s meteoric rise to become a $13 billion company. Then, by looking at things from a new perspective, investors can assess whether the stock is a smart buying opportunity.
Boosting growth
If you see a stock that has climbed as much as Celsius, it’s worth taking the time to understand 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 was incredible sales growth.
Behind only Red Bull and Monster drinkthe company has become the third largest seller of energy drinks in the United States. In 2023, Celsius reported revenue of $1.3 billion. This figure is 102% higher than the previous year. And it represents an impressive 25-fold increase from just five years ago.
While the soft drinks sector may be extremely mature, the energy drink category is growing faster. Perhaps consumers are not as interested in sugary drinks as they were 10 or 20 years ago. Or perhaps there is simply an increased focus on drinks that are supposedly healthier.
This is exactly what Celsius is aiming for. By marketing its products as functional drinks with certain health benefits, the company gradually gained popularity among consumers. Any consumer-facing brand should strive to do just that.
Celsius also benefited from making its drinks available to more customers. This means expanding its presence in various retail outlets. The company has also enjoyed enormous success on Amazonan extremely popular one e-commerce site that receives billions of visitors every month.
And with the help of PepsiCowhich is Celsius’s distribution partner nationally and internationally, this company is in a favorable position to continue to find success.
Is it too late to buy Celsius shares?
Since hitting an all-time high in March of this year, Celsius shares have plunged, falling 42% in less than five weeks. On May 28, Dara Mohsenian, research analyst at Morgan Stanleyissued a note saying the company’s sales fell sequentially in the week ended May 18, leading to a slight decline in Celsius’ market share.
But even after its monumental decline, I still think 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 that doesn’t give potential investors anything to go by. safety margin.
Celsius is expected to grow its revenue at an annualized rate of 31% between 2023 and 2026. That’s a far cry from the triple-digit growth investors have likely become accustomed to.
What also worries me is that these projections could prove overly optimistic. Celsius has probably already taken advantage of what is called the low-hanging fruit with its Pepsi deal. Moreover, the industry has virtually no barriers to entry. There is nothing stopping a well-funded entrepreneur from starting his own energy drink company, to which consumers could flock.
Celsius has undoubtedly been a fantastic investment over the past decade, turning a small sum into almost $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 its 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 Magnificent Stock That Turned $10,000 Into $2.7 Million was originally published by The Motley Fool
