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Celsius Holdings (CELH) stock is soaring: beware of a worrying pattern

By:
on Nov 7, 2023
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  • Celsius Holdings share price has been in a remarkable rally this year.
  • The company published strong financial results as growth accelerated.
  • The stock is forming a double-top pattern on the weekly chart.

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Celsius Holdings (NASDAQ: CELH) stock price continued its remarkable surge on Tuesday after the company published strong financial results. The shares jumped to a high of $200, a few points below its record high of $206.65. It has been one of the best-performing companies this year as it soared by over 76%.

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Demand continues to rise

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Celsius Holdings has moved from being a sleepy and little-known beverage company into one of the fastest-growing companies in the US. Along the way, the company’s market cap has surged to over $13 billion.

Celsius’ popularity has helped its sales to surge lately. Results published on Tuesday revealed that the company’s revenue jumped by 108% YoY to over $385 million. This makes it one of the fastest-growing companies in the industry. 

Its North America revenue jumped by 107% to $371 million, helped by its growing popularity and distribution deals. As a result, its international revenue came in at just $13.6 million. 

Investors believe that the company can grow its international business rapidly following the success of the US. in most periods, consumer products that do well in the US see robust growth overseas. Monster is a good example of this. 

Celsius Holdings also saw robust growth in its gross profits, which jumped to $194 million while its adjusted EBITDA rose to $103.6 million. Another notable thing about Celsius earnings was that its revenue grew as the SG&A expenses plunged to $96.3 million from the previous $226 million. Total net income was $83 million.

Celsius Holdings is an expensive stock. It has generated over $971 million in the first nine months of the year and analysts believe that its annual revenue will move to $1.25 billion. This means that it is trading at a multiple of 13x total sales. 

As I wrote in my last report on Celsius, I noted that the stock was priced for perfection. This means that it will continue doing well as long as the company can deliver strong results as it did this quarter.

Historically, we have seen several companies be overvalued for a long time. A good example of this is Monster Beverages, which trades at a forward PE of 36. And like Monster, which has a deal with Coca-Cola, Celsius has a distribution deal with Pepsi, Coke’s biggest competitor.

Celsius Holdings stock price forecast

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CELH stock

CELH chart by TradingView

The weekly chart shows that the CELH share price has been in a strong bullish trend in the past few months. It recently surged to a high of $206.38, its highest level on record. It has remained above all moving averages.

A closer look shows that the shares are forming what looks like a double-top pattern. The neckline of this pattern is at $149.52. This means that the stock will initially jump by 16% to the double-top level of $206.10.

Therefore, bulls should pay a close attention to this double-top pattern. A move above this price will see it invalidate this pattern and lead to more upside. This will see it jump to the key resistance at $220. The alternative scenario is where the stock validates the double-top and resumes the bearish view.

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