Why Celsius Stock Soared 11.5% Today

Source The Motley Fool

Celsius Holdings (NASDAQ: CELH) stock is having a great day on Thursday, rising 11.5% through 10:05 a.m. ET on the back of a pair of positive Wall Street analyst notes.

Piper Sandler released the results of a survey yesterday confirming Celsius' continued popularity among teen energy drink consumers. Separately, Stifel reported this morning on a National Association of Convenience Stores tradeshow reporting positive sales trends in that market segment.

A double dose of good news for Celsius

CNBC reported on the Piper news this morning, noting that among energy drink brands favored by teens, Celsius holds a 35% market share. That's pretty astounding, actually. Across the entire market, a Statista survey in 2023 found Celsius scoring only in the single digits, while Red Bull and Monster Beverage (NASDAQ: MNST) dominated this market, with market shares of nearly 40% and 30%, respectively.

Albeit the two surveys cover different markets, Celsius's greater popularity among the younger contingent suggests Celsius's overall market share will grow as these teenagers age. Meanwhile, Stifel's report shows "generally improving sales trends" for energy drinks sold at convenience stores in 2024, where 62% of all energy drink sales occur.

Is Celsius stock a buy?

A greater share of a growing market? That sounds pretty bullish for Celsius stock. Still, this leaves the question of valuation. Growth prospects aside, is Celsius stock cheap enough to buy?

At 30 times earnings currently, you might not think so. But the situation described by these two analyst reports suggests Celsius is setting up to enjoy some monster growth (if you'll pardon the term) over the next several years. Indeed, judging from analyst forecasts collected by S&P Global Market Intelligence, Wall Street sees Celsius more than tripling its reported earnings over the next five years, from $0.77 in 2023 to $2.74 per share in 2028.

That works out to a growth rate approaching 29% annually -- almost precisely in line with the price-to-earnings ratio. And if you ask me, that seems like fast enough growth to make Celsius stock a buy.

Should you invest $1,000 in Celsius right now?

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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Celsius and Monster Beverage. The Motley Fool has a disclosure policy.

Disclaimer: For information purposes only. Past performance is not indicative of future results.
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