3 Reasons to Buy Celsius Holdings Stock Like There's No Tomorrow

Are you looking for a new growth investment? Consider a stake in Celsius Holdings (NASDAQ: CELH). Shares of this fast-growing company are down 70% since hitting their all-time high last year.

But the reasons behind the deep discount are only temporary. Bargain-minded growth investors will want to take their swing on Celsius stock sooner rather than later.

Celsius ushers in the next generation of energy drinks

Celsius Holdings may not be a household name yet, despite its 11% share of the energy drink market. That industry is still dominated by Red Bull and Monster Beverage.

However, Celsius Holdings is making impressive inroads. Its 11% share of the North American market -- where it does almost all of its business -- is up from practically nothing just a few years ago. Last year's top line of $1.32 billion was up 10 times from its 2020 revenue of only $131 million.

Like most other energy drinks, Celsius's beverages are made with a combination of caffeine, vitamins, minerals, and plant-based ingredients. However, unlike most other energy drinks, there's no sugar, corn syrup, aspartame, or artificial colors or flavors. The company's marketing boasts that its beverage are formulated scientifically, supported by a handful of published university studies measuring the drinks' thermogenic (metabolic) properties.

CEO John Fieldly clearly has a finger on the pulse of the energy drinks business as well. Although Celsius was founded in 2004, the vast majority of its growth took shape after Fieldly took the helm in 2018.

So, given the recent sell-off, why is Celsius Holdings such a must-have name now?

3 reasons to buy Celsius stock sooner rather than later

Three reasons stand out among the rest.

1. It's growing (with plenty of room to continue doing so)

Investors familiar with Celsius Holdings may balk at the claim. The company is growing, but 2024's expected top-line growth of 7% isn't exactly riveting compared to previous years.

There's an important footnote to add to that number, however, as the year-over-year comparison is skewed sharply by minority owner and distribution partner PepsiCo. The beverage behemoth purchased too much of the energy drink last year and is now scaling back its on-hand inventory until some of the backstock is out of the way. Once it is, look for revenue growth to reaccelerate to a double-digit pace.

Data source: StockAnalysis.com. Chart by author.

There's certainly room for the company to continue growing. Consumer research outfit Straits Research suggests the global energy drinks business is set to expand at an average annualized pace of 8.5% through 2032. With the company's recent entry into international markets like France, the U.K., and Ireland, Celsius could easily earn more than its fair share of this growth.

2. This is the direction the energy drinks business is moving

That being said, there's a very specific reason Celsius is well-positioned to outpace any industrywide growth in the U.S. or abroad.

As is the case with most industries, energy drinks are evolving as time marches on. While Red Bull and Monster became staples for college students and video gamers, Celsius is broadening the appeal of its products by aiming at the fitness-minded crowd.

It's also appealing to women -- Celsius has benefited from the fact it hasn't had to reposition its brand, while its bigger rivals spent years focused on male consumers.

Whatever its customer base looks like, its marketability isn't in question. Sugar-free and "better for you" products are becoming quite the norm within the world of beverages. The energy drinks sliver of the market is no exception.

3. Celsius stock is undervalued

Now down 70% from its previous peak, Celsius stock is simply undervalued.

That's the word from the analyst community, anyway. While investors have been rattled since the release of the company's first-quarter results, which first prompted warnings of a sales slowdown, analysts remained largely unfazed. Their current consensus target stands at $46.87 per share, or 63% above the stock's present price. Moreover, most of Wall Street considers Celsius Holdings not only a buy but a strong buy.

Shares are currently priced at 36 times this year's anticipated earnings and less than 30 times 2025's earnings estimates. That's not cheap, but it is a bargain for a company capable of the sort of growth Celsius can put up -- growth it's likely to deliver again beginning next year.

Just be sure you can stomach the volatility

Celsius stock still isn't for everyone. Although there's a bullish argument for a rebound, volatility is the norm here, and this stock isn't for the faint of heart.

However, if you're a growth-minded investor willing to take on some calculated risk, Celsius Holdings is a compelling prospect. It has the right product at the right time, and it has already proven it can win in a highly competitive industry.

Should you invest $1,000 in Celsius right now?

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James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Celsius and Monster Beverage. The Motley Fool has a disclosure policy.