1 Growth Stock Down 64% to Buy Right Now

There is no getting around the fact that Celsius (CELCH -2.64%) the stock has been hard to hold for the past few weeks. Share prices are down a hefty 64% from their peak in May — and for good reason, as sales growth slows. But this slowdown was to be expected given the meteoric penetration of its market by this newcomer. And that is the heart of the buying opportunity created by the pullback.

While peak math growth may be slowing, it’s still impressive growth, and the Celsius story is still a compelling one. The stock is simply going through some predictable (but temporary) growing pains. Here’s why it’s a buy right now.

Celsius was punished for flying too far, too fast

In case you’re reading this and aren’t familiar, Celsius is an energy drink company in the same vein as Monster Drink or Red Bull. However, it is different from the two dominant players of the industry. While Red Bull and Monster have been around for years and established roots in the extreme sports and occasional energy crowd, the (relatively) latecomer Celsius is mostly targeting the fitness market. It promotes itself as “the better-for-you, sugar-free alternative to traditional energy drinks.”

That approach has proven successful since the company turned up the heat on its marketing efforts in early 2018 when current CEO John Fieldly took over. Since then, annual sales have grown from about $400 million to $1.5 billion, on track for more than $2 billion in 2026. Fieldly clearly has her finger on the pulse of the business; a distribution partnership with PepsiCo it certainly seems to have helped too.

Still, Celsius stock went through the same predictable pattern most high-potential young company stocks regularly undergo: giddy euphoria followed by a head-on collision with reality.

What gives?

As it turns out, while Celsius’ products bring an interesting alternative to the energy drink market, its (much) bigger competitors simply won’t come back. Monster, for example, recently doubled down on social media marketing; the decision seems to bear fruit. Celsius’ blazing growth rates of the recent past are also simply hard to sustain, falling from a previous high of 112% to a year-over-year growth of 23% for the second quarter ending in June. Investors weren’t sure how to process such a sudden and radical change. In fact, they panicked.

As is often the case with such an emotionally charged scenario, the sellers overshot their mark.

Celsius is gaining momentum

Ohdon’t misread the message. Even though it’s oversold, getting into Celsius’ stock is not for the faint of heart. The company is still finding its footing. As a result, stocks are still volatile.

For speculators who can stomach the risk, however, Celsius is exactly where it should be right now, having finally proven it’s a contender.

Chief among the bullish signs is that the company is now consistently profitable… a seriously turned corner early last year. It’s also increasingly profitable and should continue to grow its bottom line at an even faster rate than it’s improving.

Data source: StockAnalysis.com. Chart by author.

And that growth track is longer than most investors might realize.

Until now, the company has focused almost exclusively on the US market. Now that it’s gaining real traction domestically (grocery and convenience store market share in the US growing from less than 5% a year ago to over 10% now), it’s setting its sights abroad. Celsius debuted in six countries other than the United States this year alone. These include Canada and the UK followed by Australia and France, with releases expected in both before the end of the year.

This expansion connects the company to a larger portion of the global energy drink market, which is expected to grow at a strong single-digit rate over the next few years as more consumers ditch sugary sodas in favor of drinks more functional. That shift could be particularly pronounced in the United States, according to market research group GlobalData, which notes that Celsius already has a strong foothold, offering the market something unique in the functional beverage arena.

Then there are “adjacent categories” of products that Fieldly considers, such as food and bottled water. The company currently has no entry into these consumer goods categories — and may never. Still, it’s certainly an interesting growth prospect, capitalizing on its differentiated brand name.

Celsius stock isn’t for everyone, but…

Again, this ticker may not be right for everyone’s portfolio. While likely undervalued, the company is also a work in progress. It’s hard to break into a market dominated by a well-established duopoly, even if Celsius clearly wins at least some market share.

Still, as far as stories, trajectories and differentiation matter, Celsius Holdings offers promise for risk-tolerant investors. The big pullback in May was largely due to shock. Once more investors recognize that the company continues to make good progress, the underlying pessimism should return to reasoned optimism.

This might help: Despite weeks of steady selling, the crowd of analysts keeping tabs on this stock isn’t deterred. The vast majority of them still rate it a strong buy, collectively having a consensus price target of $50.36. That’s almost 50% better than the stock’s current price, which isn’t a bad place to enter a new trade.