Disclaimer: VFC has no affiliation with Celsius Holdings or with any third parties associated with the companies. VFC drinks Celsius, tho, and love every flavor except for Strawberries and Cream. VFC has received no compensation for this blog post, although there may be an advertisement or two at various locations on this blog. VFC does not offer advice or investment services and nothing you read here should be construed as such. VFC is just a guy with an opinion and access to a computer and a keyboard; bringing discussion and ideas to the table. #AhYeah.
If an uptick of trading volume last week is any indication, it might be worth paying some attention to shares of Celsius Holdings (CELH). For those new to the Celsius story, at one time this company traded as a penny stock on the OTCBB under the symbol CSUH. One share could be purchased for just three pennies back then, cheaper than a Bazooka Joe. We are now a far cry from when a two million dollar quarter was a good one.
Once the company's stock received a promotion to the NASDAQ, some massive price gains ensued, before retreating to level off in the three to four dollar range. Just a few months ago CELH traded for under $3.50, but positive earnings forecasts and news of growing distribution pushed prices higher - in spite of some fairly significant short interest for a lightly-traded stock. The only missing piece to this reborn growth story was investor interest and trading volume. That brings us to why we should be watching this week.
Three of the past four trading days saw at least 125,000 shares trade hands, two of which totaled well over 200,000. Not much, you say? Consider that the average trading volume over the past three months is just over sixty thousand, this could be new territory for CELH, and may also be an indication that shorts are covering some shares.
On 16 July the company issued a press release that reaffirmed the distribution growth of the past few quarters. This news followed other releases early in the year regarding robust new distribution chains and the introduction of the product into large-market retailers and drug stores. Combined with a record revenue year of $52.6 million, the stage is once again set for growth.
The energy drink market is, of course, a tens-of-billion dollar market and is rabid with competition. Changing course from its earlier years where Celsius tried to build a following as a niche functional beverage and pre-workout drink, Celsius has made serious strides making a dent in that market, advertised as a healthier option to some of the bigger names, often packed with sugar. The various flavors are also much more attractive than the syrupy, cough medicine taste of Red Bull, for example -- aside from the Strawberries and Cream flavor, we could do without that one.
Celsius registered sales of $14.5 million in the most recent quarter, following a quarter of over $16 million. With the announcements of robust distribution growth over the course of 2019 thus far, the next few quarters could register enough return to push shares higher towards the eight dollar mark, a target identified by some analysts, who also rated the stock as a 'Buy'. It's my opinion that this upcoming earnings report is not quite as important as the following one, which should show real results from the recent distribution gains.
There have already been some false alarms with CELH early in 2019, so the recent spike in volume is not yet a pattern. Volume could disappear as quickly as it came, as it often does with CELH, That said, the time to be in these things is before the real interest arrives, so any other pullbacks - like the one we saw into the mid-threes earlier this year - could be decent accumulation time for those encouraged by the recent signs.
A couple of other items of interest, insider holding accounts for about 35% of shares outstanding, according to the company's investor toolkit. This is a higher insider percentage than listed on most financial sites. Additionally, Celsius updated it's distribution agreement in China to a royalty-based deal, which will recoup over twelve million dollars to Celsius over the next five years.
It could be another false alarm as we have seen, but this could also be a new turning point as Celsius gears up to take a stronger foothold in the energy drink market with a 'healthy energy' campaign geared around #livefit.
Let's see what this week brings.
Disclosure: Long CELH.