Celsius shares rise as Needham initiates coverage with buy rating

On Friday, Celsius Holdings Inc. (NASDAQ: NASDAQ:CELH ), known for its CELSIUS energy drink brand, experienced a surge of over 4% in the morning trading session. This uptick came as analysts at Needham initiated coverage on the company, bestowing a buy rating and setting a price target (PT) of $38. The firm also placed Celsius Holdings on their conviction list, signaling their high confidence in the stock's potential.

Needham's analysts highlighted a positive outlook for Celsius Holdings, despite a recent slowdown in consumer takeaway trends. They forecast brighter prospects for the company looking ahead to 2025, citing its position as the third player in the energy drink sector. The analysts pointed out the growing consumer preference for zero sugar products and a healthier category overall, which they believe will help re-accelerate the company's revenue growth.

The coverage initiation comes after a period during which Celsius Holdings' stock value declined significantly, with shares down approximately 70% from their peak. Needham analysts suggested that the current valuation is much more attractive compared to the spring of the previous year. They also noted that the company is likely to overcome inventory optimization challenges, which they expect to align sell-through rates more closely with reported results.

Needham's addition of Celsius Holdings to their conviction list implies a strong belief in the company's ability to recover and grow in the near future. The analysts emphasized that the energy drink market's healthier segment is improving after previously underperforming compared to historical growth rates. This improvement, along with easing inventory headwinds, is anticipated to lift a major overhang on the company's performance.

In summary, the analysts at Needham have a favorable view of Celsius Holdings' potential for revenue growth and market positioning. They have reset expectations for the company and believe that the stock is now positioned for a compelling valuation, setting the stage for positive developments in the coming years.

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Source: Investing.com