On Wednesday, Morgan Stanley (NYSE:MS) maintained its Equalweight rating and $50.00 price target on Celsius Holdings (NASDAQ:CELH) shares, following the company's third-quarter financial performance. Celsius Holdings reported net sales of $266 million, which was slightly below the Visible Alpha consensus of $269.4 million and aligned with Street Account expectations.
The results reflected a year-over-year sales decline of 31%, including approximately a $120 million impact from inventory reduction by PepsiCo (NASDAQ:PEP), which was anticipated earlier in September.
The company's gross margins fell short of expectations by 80 basis points, leading to a 3% miss in gross profit. Selling, general and administrative expenses (SG&A) were 11.3% higher than the consensus, which was a significant increase as a percentage of sales. Consequently, the Adjusted EBITDA for the quarter was reported at $4.4 million, notably lower than the $17.7 million consensus.
Morgan Stanley's analysis suggests that, excluding the inventory reduction by PepsiCo, Celsius's revenue would have been approximately flat compared to the previous year. The firm anticipates that Celsius Holdings' stock will continue to be influenced by the company's scanner data in the upcoming weeks.
The latest data indicates strong initial sales for competitors' new products, such as Red Bull's Winter Edition Iced Vanilla Berry and Monster Ultra Vice Guava, both available in regular and sugar-free versions.
The report concludes with an expectation that the debate around Celsius Holdings' stock is likely to persist, as the third-quarter results did not provide a clear direction for the company's financial trajectory. The focus now shifts to upcoming scanner data, which will play a crucial role in shaping investor sentiment toward the stock.
In other recent news, Celsius Holdings reported third-quarter results that did not meet analyst expectations. The company's revenue for the quarter was $265.7 million, falling short of the consensus estimate of $271.09 million. Adjusted earnings per share were reported at $0.00, lower than the $0.03 expected by analysts.
The company's revenue saw a 31% year-over-year decline, attributed to supply chain optimization by its largest distributor, resulting in a 33% drop in North American sales to $247.1 million. However, international sales saw a 37% increase to $18.6 million.
Despite the quarterly miss, Celsius Holdings announced that its year-to-date revenue surpassed $1 billion, marking a 5% increase from the prior year period. The company continues to focus on expanding its consumer base and broadening availability.
InvestingPro Insights
Recent InvestingPro data adds context to Celsius Holdings' (NASDAQ:CELH) financial landscape. Despite the challenges highlighted in Morgan Stanley's report, CELH maintains a strong revenue growth of 56.5% over the last twelve months as of Q2 2024. This growth, coupled with a healthy gross profit margin of 50.45%, suggests resilience in the company's core business model.
InvestingPro Tips indicate that CELH holds more cash than debt on its balance sheet, which could provide a financial cushion during periods of inventory adjustment and market competition. Additionally, the company's liquid assets exceed short-term obligations, potentially mitigating some of the concerns raised about the recent quarterly performance.
However, investors should note that CELH's stock price has fallen significantly over the last three months, aligning with the report's mention of ongoing debate around the stock's direction. This volatility is further emphasized by another InvestingPro Tip stating that stock price movements are quite volatile.
For a more comprehensive analysis, InvestingPro offers 11 additional tips that could provide deeper insights into CELH's financial health and market position.
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