Generally speaking, attempting to buy a stock at an exact low (or get out at an exact high) often does more harm than good. Timing your trades with perfect precision isn't just difficult, it's downright impossible, and made even more challenging by an ever-changing, emotionally charged environment.
That being said, don't ignore an obvious opportunity staring you in the face. If shares of a compelling prospect are down in a big way, pull the trigger while you can even if it's not clear that stock's bottom is in. Five years from now, you won't care -- or even remember -- if you stepped in at the lowest-possible price.
The 73% pullback from its May high is a prime opportunity to plug into a long-term stake in Celsius Holdings (CELH 5.88%). Here's why you'd want to take a shot on this up-and-comer.
Celsius Holdings is the same, but different
Never heard of it? Don't sweat it. Plenty of people haven't. Although this energy drink brand is making waves, it's still breaking into a market dominated by names like Monster Beverage (MNST 0.15%) and Red Bull.
But Celsius is growing like crazy, with plenty of opportunity for more ahead.
The key to this growth is how Celsius' energy drinks are different. Like most Red Bull and Monster beverages, Celsius drinks include familiar ingredients like green tea, caffeine, guarana seed, and a bunch of different vitamins. Unlike most competing energy drinks, however, Celsius drinks don't have any aspartame, high-fructose corn syrup, or artificial preservatives or flavors.
The thing is, this seemingly small difference isn't small at all to the industry's target market. Whereas brands like the aforementioned Monster and Red Bull are often embraced by dreary-eyed college students, video gamers sitting in front of their computers for hours on end, and extreme sports enthusiasts, Celsius energy drinks are designed for the fitness-minded crowd. Six different university studies support the claim that its beverages help people burn more fat by boosting their metabolism.
And Celsius Holdings has successfully made a point of selling consumers on these differences. Since John Fieldly took the helm as CEO back in 2018 and rethought the company's product positioning as well as its marketing, annual sales have soared from less than $500 million roughly $1.5 billion.
Data source: StockAnalysis.com. Chart by author.
There's still plenty more growth potential, however, making the stock's recent pullback a prime buying opportunity.
Opportunity ahead
That's not a conclusion every investor would jump to in light of Celsius stock's recent sell-off. Indeed, many investors are probably wondering, if it's such a great prospect, why have shares fallen to a multi-month low?
The reason is the big run-up between 2020 and 2023 that turned unsustainably hot during the first half of this year. Once the market finally turned around and recognized how far and how fast it had pushed Celsius stock into profit-taking territory, it panicked.
Fanning these bearish flames was a move from distribution partner (and equity stakeholder) PepsiCo, which reset its product inventory in a way that led to a dramatic -- albeit misleading -- drop in Q3's revenue. The top-line stumble is only temporary though. Analysts are looking for revenue growth of nearly 17% next year, to be accompanied by even stronger bottom-line growth. This progress will put the company back on its previous growth track.
The ultimate reason to take a swing on Celsius Holdings stock while it's down, however, is simply that this company is striking the right chord with a growing number of consumers.
While Straits Research predicts the global energy drinks market is set to grow at a respectable but modest annualized pace of 8.5% through 2032, this growth is being led by interest in healthier, more natural options here and abroad. Both tailwinds play into the hand Celsius is holding.
Better yet, just this year the company's entered six new overseas markets including Australia, France, Ireland, and the United Kingdom. Presume it will achieve there what it did within the United States. It just needs a little time to firmly establish roots in these countries.
The reward is worth the risk
There are risks. Chief among them is its relatively small size. With a market cap of $6 billion and a domestic market share of only 11% (according to market research outfit Circana), Celsius doesn't necessarily enjoy all the clout and financial muscle it might like to have.
But, given the company's track record, the energy drink market's current evolution, and the stock's recent sell-off, it's worth the risk for growth investors who can stomach the volatility.
The analyst community thinks so, anyway. Despite the stock's recent weakness, it's still considered a strong buy by the vast majority of these professionals. Their current consensus price target of $42.93 is also 58% better than Celsius stock's current price of just over $27 per share. At the very least, interested investors should consider that analysts are clearly seeing something bullish even if most people aren't at this time.
