This energy drink stock trouncing the market appears ready for its next bull run, according to the charts
The energy drink has been part of our diet since the late 19th century as Americans shifted from alcohol consumption to something a bit more productive: sugar and caffeine. The hottest company today in the industry is Celsius. We’ll analyze the charts to determine if investors can still catch a ride on this market-beating momentum trade or whether it’s too late. Pepsi-Cola launched in 1898 and like Coca-Cola has become embedded in our society. However, America’s quest for a healthier lifestyle in a post-pandemic era led Pepsi to invest in Celsius (CELH) in August, 2022. This company has grown tremendously in recent years on the top and bottom line, as well as racking up significant percentage returns on the charts. I think it can continue. I hold the stock and March call options personally, I hold the stock in the Tactical Alpha Growth portfolio for my wealth management company, and will be looking to increase allocation in the portfolio, if we can break from a recent range. Riding Ozempic uptrend As mentioned, America quickly learned in the post-pandemic era that health and fitness is imperative to longevity and a great first step is significantly reducing the sugar intake. Pair that with the incredible success of weight loss drugs like Ozempic and you have a revitalized, energized American consumer looking for healthier alternatives to sugary fuels to slide nicely into those shapely Lululemon clothes. In Sept. 2019, CELH came to market with a sour reception. In August of 2022, Pepsi invested $550 million dollars in the company in exchange for preferred stock and a board seat to set up a ‘long-term strategic distribution agreement’ that lasts through 2041. Now Celsisus trades, following a 3-for-1 stock split, thousands of percentage points higher. International opportunity The Pepsi distribution deal helped Celsius spread across America quickly and it is now sitting at the No. 3 U.S. energy drink brand. Starting this quarter, Celsius is heading north to Canada to begin their quest to penetrate international markets. CFO Jarrod Langhan says he expects a ramp up period that will involve investment, but they expect fast growth in the back half of 2024, which then leads to other international opportunities such as the United Kingdom, Australia, and Germany. For comparison, their bigger and significantly more established competitor Monster Beverage derives 35% of its $6.3 billion annual revenues outside of the U.S. and Canada. The company is young, led by highly competent management, and is positioning themselves strategically via social media and traditional advertising in a similar way that Monster Beverage and Redbull have in the past, but this company just feels to me that they are new, fresh, and will continue to gain market share from their bigger competitors who seem to be falling into ‘maintenance management’. What the charts say The stock is currently hovering below $63 resistance and a break could be the catalyst to push the stock back towards all-time highs of $68.90 and possibly reaching my upside target of $90.00 in the coming 12-18 months. The stock is also benefiting from a rotation in the current market towards smaller-cap consumer staples as interest rates are moving up in the US, but that will be a topic to cover in future articles. DISCLOSURES: (Gordon owns CELH in personal (stock and options) and stock in wealth management business.) THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
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