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Celsius is growing with no end in sight!

Celsius stock price outlook

Key Points

  • Celsius stock can look a little expensive for most, but there is a shocking reason that justifies the price today. 
  • Momentum is here to stay, and analysts are expecting more to come from the company in the coming months.
  • A wild-card scenario could be in the works from THIS industry giant, something you will want to take advantage of.
  • 5 stocks we like better than Consumer Discretionary Select Sector SPDR Fund.

There's a significant opportunity brewing behind the scenes in today's scattered stock market, where the consumer is the only pillar standing strong supporting the latest GDP growth figures, which, by the way, surpassed economist expectations in the past quarter.

Now, when it comes to consumer discretionary stocks, the list gets a bit blurry as far as performances are concerned, which is why it is much easier for you to just follow the Consumer Discretionary Select Sector SPDR Fund NYSEARCA: XLY, offering you a direct and diversified view into the sector.

Considering that the sector has outperformed the S&P 500 by as much as 10.6% so far into 2023, it would be wise to find where the momentum is, or in other words, which stock in this winning space is being favored by the market, within reason, of course.

Celsius Holdings

Knowing what you know now, you would also favor the consumer discretionary sector; however, what if you knew there was a stock that outperformed the whole industry by a whopping 49.0% year-to-date? That stock is Celsius NASDAQ: CELH, and its winning streak is here to stay.

Breaking down the beverage industry, there are probably two other honorable mentions, and even though they don't carry the growth potential that Celsius does, they have something this up-and-comer does not. Coca-Cola NYSE: KO and PepsiCo NASDAQ: PEP, with their tremendous moat and performance history, are hungry for growth.

Within this industry, taken as a whole peer group, you can begin to understand the fantastic opportunity ahead in Celsius. The average price-to-earnings ratio in the industry stands at a 12.2x multiple. Clearly, these mentioned names are outliers in the space.

Coca-Cola calls for a 21.2x P/E, above the average due to its strong brand penetration and robust financials; the same - except for brand, some would argue - could be said of PepsiCo, which trades at a similar 22.1x. Celsius, on the other hand, can be bought for 94.4x, that's 673% above the industry!

Most value investors would be headed to close this tab on their monitor, but you are not 'most,' are you? You are here to uncover the reasons behind the market's willingness to overpay for a new company breaking into the industry, and you are about to get your two cents' worth.

Too good to pass up

While the industry is expected to grow its earnings per share by an average rate of 10.6% for the next twelve months, Celsius analysts point to a massive bump of 53.5%, which could explain why markets are happy with buying the stock at these valuations.

Now, here's a wild card scenario for you to consider. Markets are crazy about the stock, that's undeniable, but why overpay for a small company during times when BlackRock NYSE: BLK is advising clients to ditch pricy stocks and focus on safer bets like fixed-income instruments?

Turns out, Celsius has deep ties with PepsiCo, as their latest proxy statement points to a $550 million investment into Celsius by PepsiCo to expand their distribution strategy and boost further growth. What is interesting is that James Lee, who joined Celsius' board in 2022, is a Senior Vice President of corporate finance at Pepsi!

Considering that the industry is expected to grow its EPS by 10.6%, and PepsiCo is only pushing out an expected 7.4%, it would make sense that management is looking for ways to boost this bottom-line growth to justify its P/E valuation above the industry.

Yes, what you are reading is the potential (wild card) scenario for a takeover, where PepsiCo would buy out the Celsius brand. It only makes sense; it is a bolt-on acquisition based on the distribution cooperation, the board has PepsiCo personnel, and it would be a win-win for both names.

Now, an outright purchase may not be in the books. Still, indeed, a continuation of further investments is, that is, if Pepsi wants to remain the largest shareholder and keep its operational influence on the brand.

In either case, which you can be sure the market has already factored into their valuation calculations, is more than enough to justify the above-industry prices that Celsius trades for.

Remember that Warren Buffett 'overpaid' for Coca-Cola stock many years ago and came out an undisputed winner; this could be your Buffett moment by backing the long-term success of Celsius.

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Should you invest $1,000 in Consumer Discretionary Select Sector SPDR Fund right now?

Before you consider Consumer Discretionary Select Sector SPDR Fund, you'll want to hear this.

MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Consumer Discretionary Select Sector SPDR Fund wasn't on the list.

While Consumer Discretionary Select Sector SPDR Fund currently has a "Hold" rating among analysts, top-rated analysts believe these five stocks are better buys.

View The Five Stocks Here

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Gabriel Osorio-Mazilli
About The Author

Gabriel Osorio-Mazilli

Contributing Author

Value Stocks, Asian Markets, Macro Economics

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Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Celsius (CELH)
3.9754 of 5 stars
$28.82-4.7%N/A31.67Moderate Buy$57.29
BlackRock (BLK)
4.8304 of 5 stars
$940.53-0.9%2.17%23.90Moderate Buy$943.93
PepsiCo (PEP)
4.7407 of 5 stars
$167.21-0.5%3.24%24.27Hold$185.29
Coca-Cola (KO)
4.1843 of 5 stars
$69.01-1.7%2.81%27.60Moderate Buy$71.07
Consumer Discretionary Select Sector SPDR Fund (XLY)N/A$195.01-1.6%0.77%N/AHold$0.07
Compare These Stocks  Add These Stocks to My Watchlist 


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