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A comment from 'Celsius Fan' in response to this week's 'Weekly Stock Watch' where we mentioned that revenue for the company's most recently reported quarter was down to $1.4 million, a 43% decrease from the same quarter of the previous year:

VFC, I would take note that the $1.4 million revenue figure was adjusted downward by a 2010 return reserve adjustment realized in 2011 of $508,000. Putting that number back in would register sales of $1.9 million; a truer indicator of steady consumer demand in their niche market. The past two quarters showed tough comparisons, but I'm hoping for steady improvement in 2013.

VFC's Take:  As noted in the Celsius Holdings (CELH) third quarter report, "Net revenues for the three months ended September 30, 2012 totaled $1.4 million as compared to $2.5 million for the same period in 2011, a 43% decrease. A significant portion of this decrease is attributable to a 2010 return reserve adjustment realized in 2011 which accounted for $508,000 of the difference, timing of international shipments, and a reduction in distribution outlets, which was offset in part by increased sales to existing domestic accounts."

Celsius fan is correct in duly noting the write-down, as described in the company's report.  Regardless of the write down, though, the trend continues south and each report is accompanied by excuses for stagnant revenue.  That fact, combined with previous notes of deep discounting and product returns does little to build investor confidence.  It's also concerning that company changes its packaging, slogan and strategy fairly often - all stuff that costs money.  Additionally, the hiring of Tony Little earlier this year looks to have done little - at least initially - to influence the bottom line.

That said, CELH has been beaten down to the point where it could be an attractive (although still very speculative) turnaround story again.  Sales in the US may have somewhat stabilized, as mentioned by Celsius Fan, and the push to China could do very well as many other similar companies have taken advantage of the growing market there.  It should also be noted, however, that growth in China has slowed a bit over the past few quarters.  Trading volume has picked up enough over the past couple of weeks since the report was issued to indicate that some may be taking up a position in the stock a a speculative 'night on the town money' buy while others lose patience and sell out, but the volume has not yet been noticeable enough to move the stock.

There is still the chance that the Celsius products could start catching on outside of its niche market as a pre-workout, calorie-burning beverage a bit more once all the returns and write-downs are complete, especially since the newest product offerings - notably the powdered orange packets and canisters - are viewed by some as an upgrade over previous products.  The same can be said about some of the new drink flavors, too.

As for the stock, CELH (and CSUH before it) has - in the past - often provided many golden trading opportunities, so it's worth keeping this one on the radar for that reason alone.  At this point, though, words won't do it anymore - it's all about the numbers, and that's why this quarter's $1.4 million didn't sit well with many investors, write down or not.  That's not to say that the company can't rebound in 2013, but again - it'll be about the numbers, not so much the promises.

As always, each investor must conduct his or her own DD, devise an entry/exit strategy, stick with it and invest accordingly.

Disclosure:  Long CELH.

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