Celsius Stock Is Beaten Down Now, but It Could Still Soar

Celsius (NASDAQ: CELH) stock hit an all-time high of $99.62 on March 14, 2024. At the time, many investors were impressed by the energy drink maker's rapid growth. But over the following four months, shares have declined 47%.

The bulls retreated amid concerns about its slowing sales growth, market share losses, and inventory reductions at its distribution partner, PepsiCo (NASDAQ: PEP) . However, Celsius stock can still bounce back and generate 10-bagger gain (or more) over the long term if it successfully scales up its business.

Image source: Getty Images.

Celsius is still firing on all cylinders

Celsius sells sugar-free energy drinks made from natural ingredients like green tea, ginger, guarana seed extract, and taurine. That health-oriented approach helped it carve out a defensible niche as the third-largest energy drink brand in the U.S. after Red Bull and Monster Beverage . It also attracted the attention of PepsiCo , which invested in Celsius and became its U.S. distribution partner in 2022.

From 2020 to 2023, Celsius's revenue soared at a jaw-dropping compound annual growth rate (CAGR) of 116%, and its adjusted earnings before interest, taxes, depreciation, and amortization ( EBITDA ) increased at a CAGR of 161%. Its gross and adjusted EBITDA margins have also stabilized and/or expanded over the past three years.

Data source: Celsius Holdings.

From 2023 to 2026, analysts expect Celsius to grow its revenue 29% annually as its adjusted EBITDA rises at a 30% pace. That deceleration may be disappointing to investors who have grown accustomed to its triple-digit growth rates, but the company is still expanding at a faster clip than Monster did when it was a similar size.

Celsius generated $1.3 billion in revenue last year. Monster generated $1.3 billion in revenue back in 2010, but it only grew at CAGR of 20% over the following three years. From 2013 to 2023, Monster's revenue increased at a CAGR of 12%.

How much bigger can Celsius grow?

The global energy drink market could expand at a CAGR of 8.7% from 2024 to 2033, according to The Brainy Insights. If Celsius merely matches that growth rate, its revenue could more than double from an estimated $1.7 billion in 2024 to $3.6 billion in 2033.

But Celsius has more room to grow than competitors like Red Bull and Monster because it's the underdog, and it still generates most of its revenue from the U.S. market. If it continues to increase its domestic market share (about 7% in 2023) while expanding internationally as well, it should generate much stronger sales growth than its larger competitors over the next decade.

For example, with a 7% global market share by 2033, Celsius could be generating approximately $7.8 billion in annual revenue, according to The Brainy Insight's industry estimates. That equates to a 20% CAGR over the next decade, not unreasonable given the company's track record and analysts' estimates.

Celsius is still poised for multibagger gains

That's still a bullish scenario, though. Celsius would need to halt its recent market share decline in the U.S. and successfully scale up its international business. It recently secured a new distribution deal with the Japanese beverage giant Suntory to sell its energy drinks in the U.K., Ireland, and Canada, and it could potentially expand its domestic partnership with PepsiCo into an international one in the future.

A completely stagnant Celsius can still double its size over the next decade based on industry growth alone, but the company has proven its ability to resonate with consumers, expand its market presence, and boost profitability. These are the core ingredients needed for the company to continue delivering multibagger gains. Celsius's recent pullback makes its stock more reasonably valued at 5.5 times forward sales estimates, further adding to its appeal as a long-term buying opportunity for investors who can look past the near-term volatility.

Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Celsius and Monster Beverage. The Motley Fool has a disclosure policy .