With earnings season fast approaching, Wall Street analysts are predicting which companies will outperform this quarter and which will disappoint investors. That’s obviously bad news for Celsius Holdings Inc. (NASDAQ: CELH) investors. This morning, TD Cowen analyst Robert Moskow warned investors to lower their expectations for the energy drink maker and cut his price target by 20% to $68 a share.
In response, Celsius shares fell 10.7% as of noon ET.
What TD Cohen said about Celsius
What’s going on with Celsius the company? Nothing in particular, according to Cowen. Rather, the problem is investors who got too excited about Celsius’s prospects in an economy where consumer spending is becoming more cautious. As analysts point out, PepsiCo just reported disappointing second-quarter results, in which sales growth was driven only by price increases, without any volume growth.
This doesn’t bode well for other beverage makers like Celsius. Noting that sales continue to slow, Moskow warned in a note featured on The Fly today that “consensus revenue forecasts for FY24 and FY25 are too high given the continued slowdown in sales growth.” If he’s right, that means earnings forecasts are probably too high, too, as are predictions for how high Celsius shares will rise.
Is Celsius stock a buy?
Of course, we’ll have to wait until Celsius reports earnings early next month to find out if Moskow is right. But already, things aren’t looking good. A majority of analysts expect Celsius to earn $1.08 per share this year, meaning the company is trading at 48 times earnings this year. That’s pretty high, considering the consensus forecast for 22% sales growth this year. And if Celsius misses expectations, the stock could go even higher than it already appears.
How much will Celsius ultimately be worth? 50x earnings? 55x earnings? What if the growth rate is even lower? To be honest, these valuations don’t look good to me. Investors who sell Celsius shares today may be making the right decision.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool owns shares in and recommends Celsius. The Motley Fool has a disclosure policy.
Why Celsius Holdings Shares Plummeted 10% on Monday was originally published by The Motley Fool