This rallying energy drink stock is set to break out above $100, according to the charts

Posted By: EN Todayon: May 14, 2024In: General Energy News

Celsius is an energy drink company that emerged from small-cap status in 2020 to a company with a market cap of $21 billion today. The company’s drinks are growing in popularity and quickly encroaching on the market share of its larger competitors, Red Bull and Monster Beverage. The stock carries a hefty valuation, but with the recent breakout following earnings on May 8, I think it can rally even higher. I first wrote about Celsius here on Jan. 17 as the stock was gearing up to break through the $63 and $69 resistance levels. This article from January gives more background about the company, so for today we’ll get right to the analysis, both technical and fundamental. The stock traded as high as $99.75, pulled back to the aforementioned resistance levels (now support) at $69, and is now gearing up for another attempt at $100. Looking at the chart with Elliott Wave projections included, there is an overhead resistance barrier from a pair of Fibonacci ratio projections at $88 and $94. If we can clear that resistance zone, we will be targeting a move to the next pair of projections at $127 and $140. That upside target also coincides with upper resistance from a parallel trend channel. Turning from the technical to the fundamental, the company has been growing at double- and even triple-digit clips in the last three years. The fundamental case Even so, last week’s first-quarter earnings report was met with some confusion. Though the company beat earnings per share expectations, it missed topline revenue estimates. It took a day for traders to go through the report and realize that Pepsi, its biggest distribution partner and a major reason for the company’s rapid growth, built inventories up in the first quarter of 2023 only to let them deplete in the first quarter the next year, skewing their revenue figures. The outlook is for Pepsi to replenish inventory heading into the summer season, which will drive revenue. The chart below shows quarterly revenue growth for Celsius, with the most recent quarter showing a slight lower-high based on that $355 million top-line figure. But looking out to the second quarter of 2024, the expectation is growth to $423 million and then $494 million in the third quarter. Further boosting the stock was the first-quarter gross margin figure at a new high of 51%. These fundamental inputs following earnings helped solidify the $69 as a technical support level in the chart, previously resistance levels from the January article. Bottom line If the company keeps executing like this, I believe our target of $127 should be met. The stock is not cheap at 75 times next year’s earnings, but Celsius is expected to grow earnings by about 35% over the next two years, bringing the forward multiple into a more reasonable 50-area. We hold a 2% allocation in our Tactical Alpha Growth portfolio and I will be looking to increase that size in the coming sessions. — Todd Gordon, founder of Inside Edge Capital, LLC DISCLOSURES: (Gordon owns CELH personally and for his wealth management company Inside Edge Capital Management, LLC) THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.