CELH

Celsius is going through a “drastic narrative issue” due to comments made by the CEO about a $120 million drop in sales. The issue is related to Pepsi orders, not overall sales. Pepsi had been overloading on Celsius inventory over the past year and is now trying to work through that excess inventory. Celsius’ actual consumer demand has increased 10% year-over-year, so the sales decline is not a demand issue, but rather a Pepsi inventory management issue.

Celsius’ ceiling is limited because Pepsi controls the distribution network, and Celsius has to “kneel to the king of Pepsi” in terms of order volumes. Based on Monster Energy’s multiples, Shay believes a fair valuation at $38-$42 (+40% to +55%). Pepsi’s inventory issue is a short-term headwind and we are confident in Celsius’ long-term growth potential.

On the technical side, there is a beautiful range trade opportunity from $27 up to $36 (+33%).

We are expecting this to bounce back heavily this January.

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