Analyst Estimates Take a Hit
Investors beware, as Celsius Holdings (NASDAQ:CELH) finds itself in the hot seat after a slew of analysts shave down their Q2 projections for the energy drink purveyor. The culprit? A marked reduction in inventory by beverage behemoth PepsiCo (PEP).
Spilling the beans during an investor conference, Celsius Holdings (CELH) brass put a number on it, citing PepsiCo’s inventory slash of $20 million to $30 million in the last quarter. This move follows a prior $20 million paring in Q1. Analyst Eric Serotta of Morgan Stanley opined, “While some of the reduction was driven by PEP’s working capital efficiencies and CELH starting to ship more to PEP’s smaller distribution warehouses vs larger mixing centers, we believe the bulk of the 1H inventory cut reflects that PEP’s inventories of Celsius exiting 2023 were too high for the recent sales rate.”
Market Adjustments in Full Swing
The fallout is palpable. Morgan Stanley wasted no time, slicing its Q2 revenue estimate for Celsius Holdings (CELH) from $430 million to $388 million. Brace yourself for the domino effect, as the consensus estimate for the quarter is poised to tumble with other firms pivoting to reconcile with this new reality. Looking ahead, Morgan Stanley isn’t sparing the rod, lowering its FY24 revenue projections by 5% and the FY26 forecast by 6%. To add a sting to the punch, the revised price target for CELH from Morgan Stanley now stands at $68.
Elsewhere on the Street, Wedbush Securities isn’t feeling charitable either, dialing down its price target on Celsius Holdings (CELH) to $83, while Stifel gives an icy reception by cutting its mark to $85. As investors digest this bitter pill, shares of Celsius Holdings (CELH) maintained a poker face, trading flat in the premarket session on Wednesday at $65.71.
PepsiCo’s Hold on Celsius Holdings
Let’s not forget the elephant in the room – PepsiCo (PEP) has a considerable stake of 8.5% in Celsius Holdings (CELH). The plot thickens as the energy drink landscape simmers with anticipation on how this alliance will weather the storm of inventory adjustments and revised projections in the quarters to come.