On Thursday, Deutsche Bank (ETR:DBKGn) initiated coverage on Celsius Holdings (NASDAQ:CELH), assigning the stock a Hold rating with a price target of $32.00. The firm's analysis follows a period of significant growth for Celsius, which saw a substantial increase in market share, revenue, and profit throughout 2022 and 2023, particularly after the brand's integration into the PepsiCo (NASDAQ:PEP) Direct Store Delivery (DSD) system.
Celsius Holdings' shares have experienced a steep decline of 70% from their peak in May, attributed to a broader weakness in the energy drink category and a slowdown in growth and market share stabilization for the Celsius brand. Additionally, the company's largest customer, PepsiCo (NASDAQ:PEP), has been reducing inventory and realigning incentives, further impacting Celsius's performance.
Despite the recent downturn, Deutsche Bank sees potential for a rebound in the energy drink sector by 2025, supported by favorable economic conditions. The firm anticipates a possible uptick in Celsius's shipments and consumption, contingent on no further inventory reductions and as the brand expands distribution in underdeveloped channels.
However, these optimistic signs are tempered by the expectation of increased promotional activity for Celsius and lingering questions about the sustainability of double-digit growth over the long term without the introduction of new core products or flavors. The firm's position reflects a cautious optimism about the brand's ability to navigate the challenges ahead and capitalize on industry opportunities.
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