Celsius (NASDAQ:CELH) stock has been hit hard recently. But despite the stock being down 15% over the last five trading days, it’s still up 325% over the past year.
In fact, if you bought CELH stock when I recommended it in October of last year, you would be enjoying much of those gains. The question we have to ask ourselves is whether this recent setback is a minor correction in a long-term uptrend or the beginning of a reversal?
We believe it’s a minor correction, because the fundamentals underlying CELH remain as robust as ever, and the valuation is discounted.
We expect to see this correction find support around $60. And we also expect CELH stock to power to $100 before the year is out.
The Story Behind Celsius
The energy drink industry is a huge, global force to be reckoned with. It’s been steadily growing at around 7% per year for the past decade. And the fundamentals responsible for this growth won’t change any time soon. Consumers like to feel energized and can only drink so much coffee.
However, despite the growth happening in the energy drink market, major players are failing to shift to meet consumer preferences.
Consumers are broadly taking a healthier approach to eating and drinking and are migrating to options that are organic, low in calories and gluten-free. The energy drink category — led by giants Monster (NASDAQ:MNST), Red Bull and Rockstar (NASDAQ:PEP) — have failed to fully commit to this trend.
This leaves the door wide open for another brand to dominate the health-first energy drink niche, which is benefitting from secular demand drivers.
Celsius is that company.
They have created a healthy-as-it-gets energy drink based on green tea extract. Their drinks benefit from having no added sugar, low calories and contain 200mg of caffeine. The fact they taste good and have great branding are an added bonus.
The Bottom Line on CELH Stock
Unsurprisingly, consumers continue to flock to this new energy drink in droves.
Sales rose 78% last quarter and are up more than 310% since early 2018. Over that stretch, Celsius has increased its dollar share of the energy drink category by more than 4X — from 0.3% to over 1.2%.
We expect this trend to continue.
Consumers will continue to shift toward healthier food and drink. And Celsius will reap the rewards of focusing on that growing niche. Broader distribution is expected in the coming quarters, which will pave the way for Celsius to start becoming the global standard.
Once this energy drink is as widely and easily accessible as Monster, it will leave the shelves just as rapidly.
That implies enormous long-term upside for CELH stock, since Celsius is only worth $4.5 billion, while Monster is worth roughly $50 billion.
Celsius is but one of my top picks that, long-term, will score investors big returns.
In fact, in my free e-letter, Hypergrowth Investing, I cover emerging megatrends and high-risk, high-reward stock picks each and every day. By becoming a subscriber, you’ll never have to pay a dime and will always get high-quality information on a number of market themes and picks that could make you a ton of money over the near- to long-term.
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On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.