Celsius Holdings, Inc. CELH has seen its shares plunge as much as 70.4% in the past year compared with the industry’s decline of 9.9%. The energy drinks player also underperformed the broader Zacks Consumer Staples sector and the S&P 500’s respective growth of 4.1% and 17.1% in the same time frame.

CELH Price Performance Versus Industry, Sector & S&P 500

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CELH ended the trading session at $25.69 on Friday, closer to its 52-week low of $21.10 reached on Feb. 12. While Celsius Holdings has been a high-growth disruptor in the energy drink space, the recent earnings decline, slowing revenues and intense competition seem to have fueled bearish sentiment. 

Despite the sharp decline, CELH stock continues to trade at a premium compared to industry peers, a valuation that appears difficult to justify given the company’s current challenges. CELH is currently trading at a forward 12-month P/E of 26.33, considerably higher than the industry’s 16.02. Adding to these concerns, Celsius Holdings currently holds a Value Score of C, indicating potential overvaluation relative to its fundamentals.

CELH Stock Overvalued


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Celsius Holdings’ Set of Challenges

Celsius Holdings recently reported fourth-quarter 2024 results, wherein it witnessed a decline in the top and bottom lines. While adjusted earnings per share of 14 cents tumbled 18% year over year, net revenues fell about 4%. The decline in revenue growth highlights the company’s slowing momentum compared to its historical performance. 

In addition, rising costs and promotional spending took a toll on profitability. SG&A expenses surged 73% year over year to $185 million, primarily due to legal expenses, restructuring costs and penalties paid to co-packers. This raises concerns about cost management, which could impede ongoing performance. Celsius Holdings’ increased dependency on its primary distribution partner, PepsiCo PEP, is also a cause of worry, as any adverse inventory adjustments from the latter could be potentially risky.

Further exacerbating these concerns is the competitive landscape within the energy drink category. The market has witnessed a wide range of sugar-free product launches from major players like Monster Beverage MNST and Red Bull. With heavyweight competitors aggressively expanding their zero-sugar offerings, Celsius Holdings faces heightened pressure to differentiate itself and defend its market share.

Broader macroeconomic pressures are also straining the energy drinks segment. Consumer preferences are shifting toward healthier options, while reduced discretionary spending and waning enthusiasm for energy drinks further complicate the landscape. Declining foot traffic in crucial sales channels is a concern for the company.

CELH’s Strategic Strengths Pave the Way for Long-Term Growth

Despite short-term setbacks, Celsius remains well-positioned for long-term expansion. The company continues to differentiate itself through innovation, launching new product lines such as CELSIUS ESSENTIALS and CELSIUS HYDRATION. The company has also introduced six new flavors and expanded multipack offerings, catering to evolving consumer preferences and increasing its presence in e-commerce and direct-to-consumer channels. 

One of Celsius Holdings' core strengths is its extensive retail footprint. The company has secured prominent shelf placements across major retail chains, convenience stores and online platforms, significantly expanding its market reach. Its multi-channel distribution strategy, which includes e-commerce and foodservice partnerships, not only drives revenue growth but also helps cushion the impact of seasonal or channel-specific fluctuations. 

Celsius Holdings remains one of the top-selling energy brands on Amazon AMZN, reflecting strong digital engagement and consumer loyalty. The brand has also expanded into non-traditional retail spaces, with recent placement gains in Home Depot and Subway restaurants. This strategic move increases CELH’s accessibility in high-footfall locations, supporting impulse purchases and broadening its consumer reach. 
 
Celsius Holdings has taken aggressive steps to expand internationally, recognizing the opportunity to reduce its reliance on the North American market. The company has successfully entered Australia, New Zealand, France and the UK, backed by distribution partnerships with Tesco and 7-Eleven. This global push aligns with rising consumer demand for health-focused beverages, providing a long-term growth avenue beyond its core U.S. market.

CELH: How to Play the Stock?

Celsius Holdings remains a formidable force in the energy drink industry, backed by continuous product innovation, a robust retail footprint and aggressive international expansion. However, the recent stock decline, along with factors like soft revenues, cost hurdles and intensifying competition, present notable challenges. To conclude, Celsius Holdings’ ability to navigate its challenges while capitalizing on its strengths will determine whether it can justify its premium valuation and reclaim its upward trajectory in the coming years. Thus, maintaining positions in the stock seems prudent for now. CELH carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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