Could Buying Celsius Holdings Stock Today Set You Up for Life?

In theory, any stock has the potential to set you up for life. The stodgiest value stock may stick around for decades, supplying you with slow price gains and eventually generous dividends. The riskiest upstart might become the next big thing, turning a small investment into game-changing wealth.

Those are two different methods for growing your nest egg in the long run. Can energy drink maker Celsius Holdings (NASDAQ: CELH) get the job done if you buy the stock today?

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Let's think about that.

What kind of wealth can Celsius Holdings build?

Celsius Holdings may be the freshest name in today's energy drink market, but the company is no spring chicken. Founded under the name Elite FX in 2004, Celsius Holdings entered the stock market five years later through a reverse merger with a special purpose acquisition company (SPAC). The health-focused energy drink company launched an ambitious campaign to expand its distribution, powered by funds from the SPAC-style public offering. But the heavy marketing push did not translate into skyrocketing sales growth, and Celsius Holdings was in the brink of bankruptcy in 2010. One successful turnaround story later, Celsius Holdings is the third-largest and fastest-growing energy drink brand in 2024.

Hong Kong-based billionaire Li Ka-Shing bought $16 million of Celsius Holdings stock in 2015, when the whole company was worth about $32 million. Ka-Shing has trimmed his Celsius Holdings stake to 4.4% in recent years, pocketing nearly a billion-dollar profit in the process.

So Celsius Holdings has been around the block once or twice, but it hasn't evolved into a stable value investment. Instead, the company has kicked its growth efforts into high gear. A distribution partnership with soda and snacks giant PepsiCo (NASDAQ: PEP) unlocked skyrocketing sales growth in 2022 and 2023, despite the concurrent inflation crisis. Celsius Holdings' top-line growth has left energy drink rival Monster Beverage (NASDAQ: MNST) far behind in recent years, and the stock should be viewed through the lens of high-octane growth investments.

CELH Revenue (TTM) data by YCharts

Take it easy with this volatile stock

That chart looks inspiring, but it comes with a sobering warning. The unbroken growth spurt turned into a negative trend in the last quarter, as Pepsi reduced its Celsius Holdings orders in an effort to rebalance inventories across its distribution pipeline.

Celsius Holdings is not immune to market changes, altered consumer preferences, and other macroeconomic effects. And Monster has a history of pushing back against incoming challengers until they lose their footing. The Bang Energy brand, for instance, faced false advertising lawsuits from Monster that eventually drove its parent company into bankruptcy. Monster bought Vital Pharmaceuticals at a bankruptcy discount and sells Bang drinks alongside its comparable Reign products.

Bang's workout-boosting message didn't hold up in court. Monster could bring similar charges against Celsius Holdings' health benefit claims someday. Even with Pepsi by its side, I'm not sure Celsius Holdings can handle that challenge. Remember, Monster also comes with the backing of an even larger distribution partner -- legendary Pepsi nemesis Coca-Cola (NYSE: KO).

Is now the time to invest in Celsius Holdings?

I'm not trying to convince you that Celsius Holdings should be watched exclusively from the sidelines. This is an interesting stock with a unique marketing message, all in the high-growth field of energy drinks. Once the intense Pepsi partnership gets back on track, Celsius Holdings should get back to robust growth for the foreseeable future. And the stock isn't terribly expensive, with several of its growth-oriented valuation ratios sitting well below Monster's levels.

This just isn't the kind of stock you should bet the proverbial farm on. Celsius Holdings is a promising stock, but also a fairly risky one. About 16% of its shares have been sold short and the stock has an unstable beta value of 1.76. For those unfamiliar with that volatility metric, a beta reading of 1.0 means the stock is likely to follow the moves of the S&P 500 (SNPINDEX: ^GSPC) index. A very high score, like the one Celsius Holdings sports, indicates a tendency to rise or fall much faster than the broader market.

So Celsius Holdings may be a reasonable pick for a smallish investment, nestled deep inside a diverse portfolio. But it could go down in the long run, just as easily as it might rise. Celsius Holdings does not look like a reliable cornerstone for your hard-earned nest egg.

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Anders Bylund 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.