The last decade has been a phenomenal period of growth for many Nasdaq stocks. Even with the disruptions of the pandemic and subsequent inflation, top-notch companies have adapted and thrived. And it’s not just the technology sector that’s delivered chunky gains.
Sports drink manufacturer Celsius (NASDAQ:CELH) has captured a significant chunk of the health & fitness market, boosting sales to the point that the stock’s up 5,635% since the start of June 2015. That’s the equivalent of a 50% annualised return – enough to transform a £5,000 initial investment into £286,750!
It’s worth mentioning that this phenomenal gain comes after the stock has plummeted by over 70% from its 2024 peak. But with the shares starting to bounce back by 62% in 2025, does this crash in market-cap present a fantastic buying opportunity for long-term investors?
A strategic turnaround
There were several factors at play behind the recent Celsius share price crash. Part of the puzzle was simply investors getting too ahead of themselves in terms of the valuation. But the real concern was slowing revenue growth that missed lofty expectations. At the same time, more money was being spent on marketing despite the slowdown, compressing margins and calling into question the true pricing power of its brand.
Since then, management‘s updated its strategy, and investors were pleased to see growth begin to stabilise. At the same time, Celsius began revamping its core brand, improved its shelf presence, and introduced more effective marketing campaigns.
Combining these positive steps with a general demand improvement within the broader energy drink space, the analyst team at TD Cowen have upgraded their 12-month share price target from $37 to $55. That’s around 25% higher than where the Nasdaq stock’s trading today.
What could go wrong?
Investing early in successful turnaround stories can yield impressive investment gains. However, Celsius isn’t out of the woods yet, and there are still plenty of risks on the horizon.
At a forward price-to-earnings ratio of 69, it seems the market’s valuing this business as if its turnaround is already complete. Sadly, that’s far from the case. The company’s in the middle of digesting its $1.8bn acquisition of Alani Nu in 2024.
The takeover seems to be quite strategic, given it grants the firm far more exposure to the fitness & health market without cannibalising its existing customer base. However, acquisitions of this scale rarely go smoothly, introducing significant execution risk. And if the newly acquired products fail to live up to expectations, Celsius could easily struggle to generate shareholder value.
The bottom line
There’s a lot to like about this enterprise. Health awareness is becoming increasingly dominant among consumers, creating a nice long-term tailwind for businesses like Celsius. And given management’s impressive track record, I’m willing to give the benefit of the doubt when it comes to the Alani Nu acquisition.
However, the valuation’s simply too rich for my tastes. Even with shares still trading firmly below their 2024 peak, the earnings premium is exceedingly demanding. And likely, all it takes is yet another missed earnings or revenue target to spark a fresh wave of volatility. With that in mind, I’m keeping it on my watchlist.
