Truist Securities adjusted its financial outlook for Celsius Holdings (NASDAQ: NASDAQ:CELH), reducing the stock's price target to $30 from the previous $45 while maintaining a Hold rating on the shares. The revision follows a recent announcement by Celsius management during an investor conference, where they disclosed a significant inventory reduction by their largest distributor, PepsiCo (NASDAQ:PEP).
The inventory destock, which amounts to $100-$120 million for the third quarter of 2024 (3Q24), is expected to significantly impact Celsius's sales and EBITDA for both the third quarter and the full year of 2024. As a result, Truist Securities has revised its revenue and EBITDA estimates for the coming years. For 2024, the firm now anticipates revenue and EBITDA to be $1.42 billion and $283 million, respectively, a decrease from the previous estimates of $1.57 billion in revenue and $356 million in EBITDA.
The financial forecasts for subsequent years have also been adjusted. For 2025, revenue is now projected at $1.68 billion with EBITDA of $389 million, down from the earlier projection of $1.80 billion in revenue and $430 million in EBITDA. The 2026 outlook has been similarly revised, with new estimates of $1.85 billion in revenue and $453 million in EBITDA, compared to the prior estimates of $1.99 billion in revenue and $487 million in EBITDA.
This price target adjustment reflects the immediate financial implications of the distributor's inventory reduction for Celsius. The company's stock price target has been modified accordingly to align with the updated sales and profit expectations following the news from the investor conference.
Celsius Holdings is grappling with a challenging environment due to PepsiCo's decision to reduce its inventory by $100-120 million. This move has led to a series of adjustments in Celsius's sales estimates by multiple financial firms. Piper Sandler, for instance, revised its sales estimates downward for 2024 and 2025, resulting in a reduction of the price target to $50 from the previous $65, while maintaining an Overweight rating on the shares.
Similarly, Jefferies, Roth/MKM, and BofA Securities have also adjusted their price targets for Celsius, reflecting the anticipated impact of PepsiCo's inventory reduction on the company's revenue and margins.
Despite these headwinds, Celsius reported a 23% increase in total revenue, setting a record at $402 million, and a 30% rise in international revenue to $19.6 million. The company has managed to maintain its category growth leadership and expand its shelf presence amidst these challenges.
InvestingPro Insights
In light of Truist Securities' revised financial outlook for Celsius Holdings (NASDAQ: CELH), it's valuable to consider additional data and insights. According to InvestingPro data, Celsius has experienced a significant revenue growth of 56.5% over the last twelve months as of Q2 2024. However, the stock has seen substantial price volatility, with a 1-month price total return of -21.67% and a 6-month price total return of -62.65% as of the same period.
InvestingPro Tips highlight that Celsius is trading at a P/E ratio of 31.23, which is relatively low compared to its near-term earnings growth, suggesting potential for investors looking at earnings multiples. Additionally, the company holds more cash than debt on its balance sheet, which could provide some financial stability amidst the inventory reduction by PepsiCo.
For those seeking further guidance, there are additional InvestingPro Tips available at https://www.investing.com/pro/CELH that may provide deeper insights into Celsius's financial position and market performance. With these considerations, investors can better gauge the potential risks and opportunities associated with Celsius Holdings.
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