Is Celsius Stock Going to $40? 1 Wall Street Firm Thinks So.

Celsius Holdings (NASDAQ: CELH) has had a rough year, with lower sales amid a cautious consumer-spending environment. But Needham recently raised its price target from $38 to $40 following the company's latest earnings report.

Wall Street price targets are usually estimates of where an analyst thinks the stock will trade in the next 12 to 18 months. They're not that meaningful for anyone with a long-term investing horizon. That said, the firm's bullish call implies a positive direction for the business that could signal a buying opportunity for investors.

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What's impacting Celsius stock's performance?

Celsius finished 2024 with revenue down 4% year over year in the fourth quarter and up 3% for the full year, a significant decline from the triple-digit growth the company reported as recently as 2023. Revenue is down as its largest distributor, PepsiCo, made major adjustments to inventory last year amid lower demand.

The long-term growth of the energy drink market is still a big opportunity for Celsius, which currently ranks third in market share behind Red Bull and Monster Beverage. On that note, the company's recent move to acquire Alani Nu could broaden the appeal of its products to a wider demographic.

Some investors may look at the $1.8 billion deal as a stretch for growth in a challenging environment. But Alani Nu seems to be an affordable way for Celsius to significantly increase market share and expand its beverage lineup with a new range of flavors. Importantly, it will be accretive to the company's earnings in the first year, according to management.

With a forward price-to-earnings ratio of 28, Celsius doesn't have to return to triple-digit growth rates in order to reward shareholders going forward. Trading at approximately $27 per share as of this writing, it's uncertain if the stock will be able to rebound nearly 50% in the near term to reach Needham's $40 price target. But following the stock's 73% decline from its all-time high, the lower valuation is certainly providing investors with much better value and return prospects.

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John Ballard 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.