Celsius (CELH) is building a cup base with a buy point of 118.29. Shares reclaimed their 50-day moving average last week and are holding above that key level. Volume surged as they cut past the 10- and 50-day lines. The somewhat asymmetric cup of this energy drink stock has a near-ideal depth of 34%.
Celsius is on the carefully selected IBD 50 and IBD Leaderboard lists of growth stocks that are proving to be market leaders.
The energy drink stock ranks 9th in the Beverage-Non-Alcoholic group, which holds 60th place among IBD’s 197 industry groups. The Boca Raton, Fla.-based company has a less-than-ideal 74 Composite Rating as a result of erratic profit performance in the last year.
However, the Relative Strength Rating of 97 confirms the defensive play’s popularity with investors, placing it at or above 97% of all publicly traded stocks. Its RS line is also at a 52-week high, showing superior performance compared to the S&P 500.
Energy Drinks Drive Strong Partnerships
Third-quarter sales grew to $188.2 million, a whopping 98% year-over-year increase. However, the 28 cents-per-share loss for the quarter was steeper than the prior year’s 13-cent loss.
One reason for the mixed results: Celsius sells energy drinks and protein bars, which tend to perform according to seasonal variations. The third quarter may be a seasonally-weak period, with folks taking summer breaks and students heading back to class.
Last week, it announced a multiyear deal with the Professional Fighters League (PFL), the second largest mixed martial arts sports organization, triggering an 11% share spike. As a result of the deal, Celsius will be the official energy drink partner for the organization, starting with the 2022 PFL World Championship on Nov. 25 at Madison Square Gardens.
Celsius’ products include sparkling and nonalcoholic beverages and powder packets, all under the CELSIUS brand name. It also sells Celsius Heat, which provides pre- and post-workout amino acid supplements.
According to the company, its energy drinks increase metabolism while burning calories and body fat. It comes as a drink supplement as well as in an “on-the-go” powder form.
Products are available in US grocery stores, convenience stores and fitness specialty retailers. Other countries where Celsius products are available include Puerto Rico, Sweden, Finland, Norway, China, Hong Kong, Malaysia, Kuwait, Bermuda and Australia.
In August, Celsius entered into several agreements with PepsiCo (PEP). These include a securities purchase, a lockup agreement, a distribution agreement and a channel transition agreement. Through these agreements, the company issued 1,466,666 shares of Series A Convertible Preferred Stock and received $550 million in cash.
In return, Pepsi will become the primary distributor of Celsius products in the US and certain overseas markets.
Strong Institutional Interest
Institutional interest is very high for this market leader, which came public in May 2017.
Mutual funds own a staggering 80% of outstanding Celsius shares. Strong institutional interest is a further indication of the energy drink stock’s technical and fundamental power, according to the CAN SLIM stock picking methodology. Among ETFs, the iShares Russell 2000 ETF (IWM) and the Vanguard Small Cap ETF (VB) hold shares.
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