Celsius has created more billionaires over the last decade than Apple.
Apple (AAPL -0.76%) has created a number of billionaires since its initial public offering (IPO). The tech giant went public in 1980 at a split-adjusted share price of $0.10 and trades at about $228 today, meaning a $10,000 investment back then would be worth about $22.8 million today. That’s a life-changing gain, but Apple probably won’t replicate this billionaire-creating dynamic in the coming decades.
Apple is already the world’s most valuable company, with a market capitalization of $3.47 trillion, but its core growth engine is cooling: The company still relies on aging iPhones for more than half its revenue, its Mac and iPad product lines are also aging, and its high-growth services business is facing antitrust headwinds in the U.S. and Europe.
Image source: Getty Images.
While Apple remains a safe long-term investment, investors looking for bigger gains should look at smaller companies that have generated the kind of profits that make billionaires. One such company is energy drink maker Celsius (CELH -1.11%), whose stock has soared 18,680% over the past decade, turning a $10,000 investment into nearly $1.9 million. The same investment in Apple would have grown to about $90,000 over the past decade.
But Celsius’ market cap is just $8 billion, far less than its rival Monster Beverage (MNST 2.25%), which has a market cap of $50 billion. So can Celsius generate the profits that will create more billionaires?
An amazing story of reversal
Celsius was founded in 2004 and went public in 2006. The company sought to carve out a niche with a sugar-free energy drink made with natural ingredients like green tea, ginger and various amino acids, and claimed its drinks had “thermogenic” properties that would help people burn more calories during exercise.
After going public, Celsius rapidly expanded its capital-intensive direct-to-consumer (DTR) and direct-to-store (DSD) distribution network to attract more retailers, and it also launched expensive marketing campaigns to promote its drinks.
Unfortunately, these costly strategies did not generate enough revenue to offset the growing losses, and by 2010 the company aggressively cut costs in order to stay afloat. That same year, the company was delisted from the Nasdaq Stock Market and became an over-the-counter stock.
The delisting was a wake-up call for Celsius, which restructured by replacing its entire board and leadership, rebranding and repackaging its drinks, increasing gross margins by eliminating unprofitable accounts like Costco Wholesale, and targeting health-conscious businesses like gyms and health-supplement stores rather than supermarkets and big-box stores. When it eventually returned to grocery stores, it cleverly placed its drinks in the health and beauty section rather than the beverage section.
This turnaround led to Celsius returning to the Nasdaq in 2017. John Fieldly, who served as Celsius’ CFO from 2012 to 2017, became the company’s permanent CEO in 2018. Under Fieldly’s leadership, Celsius has maintained its momentum, further appealing to health-conscious consumers and becoming the third-largest energy drink in the US after Red Bull and Monster Beverage.
How fast is Celsius growing?
From 2013 to 2023, Celsius’ revenue grew from $11 million to $1.32 billion, a compound annual growth rate (CAGR) of 61%. Gross margins expanded from 38% to 52%.
metric
2020
2021
2022
2023
First half of 2024
Revenue Growth
74%
140%
108%
102%
29%
Gross profit
46.6%
40.8%
41.4%
48%
51.6%
Adjusted EBITDA margin
12.2%
10.7%
10.9%
22.4%
24.9%
Data source: Celsius Holdings.
Over the past four and a half years, Celsius’ revenues have continued to grow as its earnings before interest, taxes, depreciation, and amortization (EBITDA) margins have expanded. A new domestic distribution agreement with PepsiCo, which began in August 2022, has led to significant sales growth in 2022 and 2023.
That growth has been fueled by rising sales on Amazon and the expansion of a smaller international division. Earlier this year, Celsius inked a new distribution deal with Japanese beverage giant Suntory to sell its drinks in the UK, Ireland and Canada. PepsiCo, which bought an 8.5% stake in Celsius two years ago for $550 million, may also eventually expand its domestic distribution deal into international markets.
However, Celsius’ growth slowed in the first half of 2024 as it completed the ramp-up period of its distribution agreement with PepsiCo. The company has also suffered some market share loss in the increasingly competitive U.S. energy drink market.
Can Celius still generate billionaire-making profits?
However, analysts expect Celsius’ revenue to grow at a CAGR of 16% from 2023 to 2026, while Monster’s revenue will grow at a CAGR of just 8%. Analysts expect Celsius’ adjusted EBITDA to grow at a CAGR of 19% over this three-year period.
These growth rates are steady, and Celsius’ stock looks reasonably valued at 4x next year’s revenue and 18x adjusted EBITDA. But the company’s business is slowly maturing, so it probably won’t be able to turn a $10,000 new investment into $1M+ again in the next decade. That said, Celsius remains a solid growth stock that could well outperform its peers, the broader market, and even larger blue-chip companies like Apple over the long term.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Leo Sun has invested in Amazon and Apple. The Motley Fool has invested in and recommends Amazon, Apple, Celsius, Costco Wholesale, and Monster Beverage. The Motley Fool has a disclosure policy.
