2 Factors Affecting Celsius Stock's Muted Response Despite Strong Earnings

The performance of Celsius Holdings in the fourth quarter showcased impressive achievements, with the company delivering triple-digit growth for the third consecutive year and surpassing revenue expectations. Additionally, the company outperformed earnings estimates and expressed positive outlooks for its future. Despite the high potential for a short squeeze due to the previously high short interest, the anticipated immediate rally in stock price didn't materialize.

On Thursday, Celsius' stock opened slightly lower, contrary to expectations after the release of their financial results. But it didn't take long for the situation to change — the stock soared more than 10% just 45 minutes into the trading session. However, a couple of factors might have led to initial investor hesitance.

1. Differing Impacts of Earnings Surprises

Even though Celsius has demonstrated profitability and strong growth, its earnings beat in the fourth quarter was relatively modest compared to earlier quarters. For instance, while earlier in 2023 the company surprised earnings estimates by 86% to 88%, the fourth quarter only showed a 13% beat. Despite exceeding the average Wall Street projection for per-share earnings, the result seemed underwhelming against the backdrop of previous performances.

2. Quarterly Comparisons Highlight Challenges

The last quarter's revenue was a significant 95% improvement year over year, but when compared sequentially, it revealed a decline from a record high in the preceding quarter. This trend of a quarter-over-quarter revenue dip during the holiday period has occurred several times over the past years. Furthermore, gross margin and net income margin also declined from the third quarter. Additionally, Celsius experienced a slight drop in market share on Amazon.com, contrasting with competitor Monster's increase.

Despite these concerns, Celsius continues to show promise with accelerating international sales and expansion efforts that could benefit 2024's financial story. The initial stock dip after the earnings report could have inadvertently triggered a short squeeze, causing the stock to eventually rally. For those invested in the stock, much like drinking a can of Celsius, patience appears to be a virtue before the anticipated energy kicks in.

Earnings, Growth, Revenue