Could This Bull Market Buy Help You Become a Millionaire?

If you are on the lookout for a consumer stock with the potential to make you a millionaire, consider Celsius Holdings (NASDAQ: CELH). The reasoning is quite straightforward. Its competitor, Monster Beverage, has proven to be one of the top-performing stocks over the past thirty years.

Celsius has faced challenges this year even in a generally positive market. However, this situation could present a unique opportunity to invest in a stock that possesses significant long-term growth potential. Let’s explore whether Celsius could be the next energy drink giant that delivers millionaire-making returns.

A major opportunity

The energy drink sector is currently led by two dominant players: Monster Beverage and Red Bull. In the U.S. market, Red Bull commands about 35% market share, while Monster Beverage holds over 29%. Celsius has managed to secure the third position with a 9% market share.

Prior to this year, Celsius was a driving force in the growth of the energy drink category within the U.S. The company grew rapidly from approximately 1% market share in early 2021 to around 4% by the fall of 2022, thanks to a new distribution partnership with PepsiCo. This collaboration helped Celsius increase its market share to 9% by the close of 2023.

Celsius’s success has been attributed to its ability to attract a broader consumer base, particularly women, who have not traditionally been a key demographic for energy drinks. The brand’s aesthetically pleasing can designs, sugar-free options, refreshing flavors, and health-focused marketing message have all contributed to this appeal. Unlike most energy drinks, which typically attract male consumers, Celsius has achieved a balanced male-female consumer ratio.

Although Celsius continues to experience growth, its market share has stabilized around 9% since becoming fully available across the U.S. market. Part of this stagnation can be linked to broader challenges within the energy drink category, particularly weak foot traffic at convenience stores where these products are often impulsively purchased.

Naturally, Celsius has also faced increased competition due to its earlier successes. Both Monster and Red Bull have rolled out sugar-free flavors intended to attract a wider audience, while newer brands like Alani Nu are also targeting Celsius’s market segment.

Consequently, the company has experienced a slowdown in growth this year, reflected in the decline of its stock price. This trend worsened in the third quarter, as it reported a 31% drop in sales largely due to inventory issues with its primary distributor, PepsiCo. Although PepsiCo noted that the gap between supply and demand was narrowing, some impact during the fourth quarter is still expected.

Fortunately, not all prospects for Celsius are bleak. The brand enjoys substantial popularity among younger consumers, especially teenagers. According to a recent Piper Sandler survey targeting teens, Celsius was favored significantly more by this demographic than its market share would suggest, indicating strong future growth potential.

The primary opportunity lies in Celsius’s international expansion. While Monster and Red Bull have established sizable footprints in Europe and Asia, Celsius is just beginning to enter these international markets. Since its entry into Sweden in 2009, where it holds about a 10% market share, the company has only tapped into a fraction of the global market.

Currently, only 7% of Celsius's sales come from international markets, whereas Monster garners more than 35% from its global reach. This presents a substantial growth opportunity for Celsius provided it can identify strong international distribution partners; PepsiCo lacks the extensive overseas network that Coca-Cola offers for Monster.

Can this stock make you a millionaire?

Celsius has many opportunities ahead, especially through international expansion. Additionally, the U.S. market may start to recover after a challenging year for energy drinks overall. The company has gained additional shelf space for the upcoming year and is innovating new flavors and product lines, including its entrance into the more traditionally male-dominated 16-ounce category with its Celsius Essentials product line.

As the trend towards sugar-free beverages grows, Celsius believes it can capture more market share. The recent acquisition of co-packer Big Beverage, which is responsible for a significant portion of Celsius’s production, allows the company to bring more manufacturing and packaging in-house. This move enhances their production flexibility and enables the introduction of limited-time offerings, a strategy that has proven successful for competitors like Alani Nu.

In terms of valuation, Celsius is currently trading at a forward price-to-earnings (P/E) ratio of slightly over 28, based on estimates for the upcoming year. This valuation is akin to that of Monster Beverage but suggests that Celsius has a more extended growth trajectory, given its smaller size and lower penetration into international markets.

If Celsius can grow its market capitalization to match that of Monster, which is currently valued at about $50.4 billion compared to Celsius's $6.3 billion, the potential return could be quite significant. However, achieving a similar market share as Monster will be challenging.

While Celsius may not be a guaranteed millionaire-maker, it offers solid upside potential due to its opportunities for international growth, potential rebounds in the U.S. market, and an appealing valuation. This beverage stock could be an excellent addition to an investor's portfolio.

stock, Celsius, investment