3 Reasons to Buy Celsius Stock Like There's No Tomorrow

Celsius (NASDAQ: CELH) stock has struggled since last summer amid uncertainty related to one of its major distributors. That distributor (likely PepsiCo) abruptly scaled back purchases as demand for Celsius beverages seemed to slow.

That led to a massive sell-off, forcing investors to reevaluate Celsius stock. Still, despite its challenges, investors may have compelling reasons to buy the beverage stock, and these three reasons may explain why.

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1. Its lead in an energy drink niche

Celsius is one of many competitors in an admittedly crowded energy drink industry. Red Bull and Monster Beverage lead the industry, though Celsius has reached third place.

The company has differentiated itself by targeting health enthusiasts and subjecting its product to scientific studies that validate the benefits of its drink. Also, partnering with PepsiCo supercharged that advantage as it dramatically increased the beverage's availability, bringing about huge sales growth for a time.

Amid a slowdown in those increases, Celsius shares may be on the upswing as the company announced that it would buy out a peer called Alani Nu. Alani Nu competes for the same pool of health-oriented customers, meaning Celsius is on track to solidify its lead in this part of the energy drink industry.

2. Recovery prospects and untapped opportunities

Furthermore, a revenue decline caused by a slowdown in distributor purchases may soon end. Revenue in the fourth quarter of 2024 of $332 million dropped 4% from year-ago levels. That was a significant improvement from the 31% yearly decline in Q3 and indicates the sales slowdown may soon end.

Also, Celsius increased its points of distribution by 37% in 2024 and introduced a product category called Celsius Hydration, indicating a rightsizing of inventories could return it to growth in 2025. That may explain why consensus analyst estimates call for a 25% increase in yearly sales growth in 2025.

Moreover, Celsius has a considerable opportunity to grow sales outside North America that analysts rarely discuss. At just $20 million, it is not yet a major revenue source. Still, that segment grew revenue by 39% yearly in Q4. That increase is notable since the size of markets in Europe and Asia far surpasses that of the U.S., and its partnership with PepsiCo gives it greater access to overseas markets.

Hence, even if Celsius does not take off to the same degree in these markets, success internationally would mean that its market expansion is still in its early stages.

3. Celsius stock is still a bargain

Regarding its valuation, Celsius stock still looks like a relatively inexpensive stock despite a recent rebound. Amid that recovery, it sells at a discount of more than 70% from its high in the summer of 2024.

Consequently, most of its valuation metrics have become more attractive. This does not apply to the price-to-earnings (P/E) ratio, as the earnings multiple has risen to 61 thanks to what looks like a temporary slowdown in earnings amid last year's inventory crisis.

Still, assuming the 25% revenue projection for 2025 holds, a 28 forward P/E ratio might seem reasonable. Additionally, its price-to-sales (P/S) ratio has fallen to 5, a metric that had risen to a high of 15 as recently as the spring of 2024. Thus, the recent rise could offer the bargain price and the catalyst needed to buy Celsius stock at a reasonable price and profit from it in the near term.

Investing in Celsius

Ultimately, Celsius stock is a buy, and now might be the time to invest.

Indeed, the slowdown in distributor purchases in Q3 led to a massive loss in investor interest, and Q4 showed Celsius is not out of the woods.

Now, the purchase of Alani Nu seems to have solidified Celsius' lead in the more health-oriented part of the energy drink market. Moreover, Celsius appears positioned to return to growth, and its international sales are on track to become a meaningful part of the stock's value proposition.

Amid the coming Alani Nu buyout and the low valuation, it looks like an excellent time to add shares of Celsius stock.

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Will Healy has positions in Celsius. The Motley Fool has positions in and recommends Celsius and Monster Beverage. The Motley Fool has a disclosure policy.