The best stock to buy right now: Celsius Holdings vs. Monster Beverage

Started as a California fruit juice company in 1934, Monster Drink (MNST 2.51%) been around the block a few times. The company used energy drinks when they were new and fresh, ditching fruit juice concentrate along the way.

Health conscious energy drink rival Celsius Holdings (CELCH -1.49%) it feels like a fresher face, especially in terms of building a large market presence. But this company was founded in 2004, just two years after the launch of Monster Energy, with the ambition to target energy drinks to a more health-oriented demographic.

Monster Beverage has outperformed Celsius by orders of magnitude for many years, but the smaller company is carving out a lot of shelf space these days. Aside from the privately held Red Bull empire, Celsius Holdings and Monster Beverage are pretty much the only energy drink companies that matter in 2024.

But which stock is the best buy now? Let’s take a look.

Monster Beverage: A mature energy drink veteran

Monster Beverage manages many of the most popular energy drink brands. Beyond the familiar names Monster Energy and Reign, the company also controls NOS, Bang and Full Throttle — just to name a few. Monster Energy is the biggest seller by far. The closest comparisons to what Celsius does are the two workout-oriented brands, Reign and Bang.

The company posted top-line sales of $1.9 billion in the second quarter of 2024. That’s up 2.5% year-over-year, overcoming a 3.5% headwind from unfavorable trends in the exchange rate. On a currency-adjusted basis, revenue increased 6.1%.

This needle-moving currency effect suggests that Monster Beverage does a lot of business outside of US borders. Indeed, 39% of Q2 sales came from abroad. Foreign revenue also grew faster than the company overall, expanding the international segment’s financial footprint over time.

The global expansion effort builds on the long-standing distribution partnership with Monster Beverage The Coca-Cola Company (K.O -0.07%). Signed in 2015, this deal was a game-changer, increasing Monster Energy’s global reach while providing a high-margin side business for Coca-Cola. The soft drink giant also owns about 20% of Monster Beverage. Thus, Coca-Cola has a direct financial interest in the success of the energy drink specialist. It’s good to have a giant of global industry on your side, both hard and fast.

Celsius Holdings: A hungry upstart — with decades of experience

Celsius Holdings relies on another distribution partner, but its brother in distribution arms is no less impressive. talk about other global soft drink titan, PepsiCo (PEP -0.94%)which signed a long-term agreement with Celsius Holdings two years ago.

This collaboration is nowhere near as mature as the Monster-plus-Coke deal. Pepsi also has less skin in the energy drink game, limiting its stake in Celsius Holdings to 8.5 percent. It’s also a smaller business, with $326 million in total sales in the second quarter, though it’s growing much faster than Monster Beverage both domestically and internationally.

Despite skyrocketing international sales, Celsius Holdings is just getting started with its overseas expansion plans. PepsiCo holds the reins of global distribution, with “certain exceptions” in the U.S. retail and foodservice channels. After two years, the pair introduced Celsius drinks to Canada and the British Isles, with plans to launch in France, Australia and New Zealand in the second half of 2024.

95.4% of the company’s total sales in the second quarter came from the domestic market, leaving only 4.6% for the developing international operations. It’s a big world out there, and the Pepsi/Celsius partners have barely scratched the surface of the overseas sales opportunity.

Final verdict: Celsius Holdings wins, but it’s a risky bet

Celsius Holdings is the hungry debunker scraping at Monster Beverage’s mature global empire. The battle is complicated by the presence of household name soft drink giants on each side. In a way, investors weighing Celsius Holdings against Monster Beverage must pick a side in the age-old Coca Cola versus Pepsi debate — which juice legend has the upper hand in global distribution and marketing?

Aside from the explosive growth that comes with launching expansion efforts from a smaller business base, Monster Beverage does just about everything a little bit better. It’s much bigger, its profit margins are slightly wider, and its stock trades at slightly lower valuations. Plus, I trust Coke’s distribution know-how more than Pepsi’s, unless you’re thinking about snacks and oatmeal.

But is Monster Beverage’s collection of small upsides enough to outweigh Celsius Holdings’ exceptional growth and promising prospects for international expansion? I don’t think so, at least not for now.

I might consider some shares of Celsius Holdings at their current prices holding on for dear life as the smaller company paves the way for long-term success. I am reluctant to do so, as the fickle nature of consumer tastes could undermine the health-oriented market message behind Celsius holdings. Still, it’s a reasonable option if you’re willing to take that risk.

Monster Beverage is the stronger business here, but the stock looks overpriced right now. Master investor Warren Buffett prefers to buy great companies at the right price, and Monster ticks just one of those boxes today. So I’m keeping an eye out for a price correction before taking action on my Monster Beverage preference. Until then, there’s always the semi-speculative idea of ​​Celsius Holdings.