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Celsius Holdings Stock Slumps As Stifel and BofA Come In With Price Target Upgrades

Analyst Team trader
Updated 29 May 2024

After the Memorial Day holiday, Celsius Holdings (NASDAQ:CELH), a prominent energy drink company, experienced a significant downturn, seeing its stock price fall nearly 17% in Tuesday morning trading before finding a little support and ending the day down 12.85%. This nosedive is attributed to unsettling sales trends that have raised concerns among investors.

Despite the drop in share price, two analysts have come in with upside revisions.

Stifel have increased their price target from $85 to $95, keeping in place their ‘Buy' rating on the stock. After meetings with two of Celsius' leadership team (CEO John Fieldly and Chief of Staff Toby David), Stifel has increased confidence in the company maintaining market share growth, despite comments that reported sales in Q2 could be impacted by the PepsiCo system.

A notable development that may influence Celsius' trajectory is its partnership with PepsiCo (NASDAQ:PEP). This relationship, which is gradually winding down, could alter the marketing support Celsius has enjoyed thus far, potentially impacting future sales and brand visibility.

The second upgrade of the day came as BofA increased their CELH price target to $84 (from $80). In a research note, the firm adds the drop in price on the stock yesterday reflects the market having a better appreciation of Q2 headwind factors that had been messaged earlier this month. The firm keep a ‘Neutral' rating on the stock, with their target price a few percent above the last close of $82.92.

More broadly, analysts have pinpointed that sales growth for Celsius Holdings slowed substantially in addition to the company's market share witnessing a reduction, sliding from 10.8% to 10.5% compared to the previous week. Furthermore, pricing for Celsius products decreased by 7.2% relative to the same period last year, signalling possible challenges in maintaining revenue growth.

Amidst these challenges, short interest in Celsius Holdings has surged, now accounting for about 10.1% of the company's overall float. This indicates a growing scepticism among investors regarding the short-term performance prospects of the company.

Despite the immediate challenges, some market observers maintain a positive outlook on Celsius' potential for growth. Their optimism leans on the expansion prospects of the brand, highlighted by the increasing number of items available per store and the growing total number of retail stores carrying Celsius products.

Analysts' consensus price target implies more than 10% upside potential for CELH stock, with the high of $110 standing in contrast to the low mark of $75. The positive sentiment to the upside may be a point of solace for investors amidst the current volatility, but the reality is that things can shift in the analyst community rather quickly and that fundamentals will play a key role in how markets evaluate the stock.

While Celsius Holdings faces immediate headwinds with declining sales trends and a transitioning partnership with PepsiCo, the long-term prospects remain strong as per analyst ratings. It may be worth monitoring the company's performance over the coming weeks to gauge the accuracy of these projections and the company's ability to turn around its current sales slump.

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The AskTraders Analyst Team features experts in technical and fundamental analysis, as well as traders specializing in stocks, forex, and cryptocurrency.