This company is transforming the energy drink industry, says TD Cowen
Celsius Holdings has plans to reach a global stage, making it an attractive investing opportunity, according to TD Cowen. The firm initiated coverage of the energy drink stock with an outperform rating and $250 per share price target. TD Cowen's forecast implies 23.8% upside from Thursday's $201.94 close. "As the strong #3 in U.S. energy drink category, the growing popularity of Celsius' differentiated products is transforming the category and driving significant new incremental consumer engagement," analyst Vivien Azer said in a Thursday note. "This supports continued market share gains in the U.S., while the [PepsiCo] partnership establishes a credible international opportunity." Shares of Celsius are up more than 90% so far this year. The stock was flat Friday. The company's drinks have skyrocketed in brand appeal among consumers with its fat- and calorie-burning properties, Azer said, resulting in roughly 80% revenue CAGR in the past five years and an 8.5% market share in U.S. energy drinks. She added that Celsius is seeing outsize growth with women and higher-income individuals, relative to its peers. The drink brand's popularity is soaring — and not just in the U.S. Following PepsiCo's $550 million investment in Celsius as part of a long-term distribution deal announced in August 2022, Azer noted that Celsius has "meaningfully" expanded its distribution across the country so far this year and has further opportunities to grow internationally in 2024. The analyst added that Celsius is set to deliver a normalized gross margin in 2023 with potential to improve moving forward. "We are cognizant that an international launch could weigh on margins … and, as valuation is tied to top-line growth, we believe this is an acceptable trade-off for investors," she said. The firm expects sales growth of 98% and 35% for fiscal 2023 and 2024, respectively. — CNBC's Michael Bloom contributed to the report.