Warren Buffett’s notable investment in Coca-Cola in 1988 exemplifies the potential of acquiring shares in a company poised for international expansion. Buffett invested approximately $1 billion, equating to a 6.2% stake in the beverage giant, shortly after the 1987 market crash. This investment paid off handsomely as Coca-Cola’s global growth led to a tenfold increase in its stock value by 1998, excluding dividends.
Today, Celsius Holdings (NASDAQ: CELH) is seeking to emulate Coca-Cola’s success by expanding its presence beyond North America. The company’s stock is currently down 66% from its peak, raising the question: Is Celsius on the brink of a major growth spurt similar to Coca-Cola’s?
International Expansion and Growth Potential
Celsius has made significant strides in the U.S. energy-drink market, emerging as a prominent player with $1.5 billion in revenue, positioning itself as the third-largest brand after Red Bull and Monster Beverage. Despite this success, Celsius has yet to replicate its U.S. achievements internationally. Last quarter, only $19.6 million of Celsius’s $402 million revenue came from outside North America.
Management is addressing this by focusing on international markets, with launches in the United Kingdom, Australia, and New Zealand, and plans for further expansion. Investors will need to closely monitor Celsius’s international revenue growth, which saw a 30% increase year-over-year last quarter. For Celsius to become a significant global player, this growth rate will need to accelerate.
Energy Drinks: A Growing Sector
Unlike the soda industry, which has seen stagnation and decline in consumption, the energy-drink market is booming, with an expected annual growth rate of 8% through 2030. Celsius stands to benefit from this sector-wide growth. With its current revenue base of $1.5 billion, reaching over $10 billion in the next decade is a plausible goal if the company succeeds in its international expansion.
Current Stock Valuation
Celsius’s stock has dropped 66% from its all-time high earlier this year, resulting in a more attractive price-to-earnings (P/E) ratio of 31 compared to its previous high of over 50. This decline presents a potential buying opportunity for investors who believe in the company’s international growth potential.
Investment Considerations
For those considering investing in Celsius at its current price, it’s worth noting that the Motley Fool Stock Advisor analyst team recently identified ten stocks with high growth potential, and Celsius was not among them. Historically, the Stock Advisor service has significantly outperformed the S&P 500, providing investors with a track record of selecting high-return stocks.
In summary, if you believe in Celsius’s potential for global expansion and are comfortable with the inherent risks, the current dip in stock price may offer a buying opportunity. However, it’s essential to weigh this against alternative investment options with proven success.
