Industry data is flashing warning signs for energy drink stocks.
Shares of energy drink company Celsius (CELH -2.16%) fell as much as 16.8% this week, according to data provided by S&P Global Market Intelligence, as industry data pointed to slowed growth for energy drinks. Shares are down 16.7% for the week at 2:30 p.m. ET.
The energy drink slowdown
To be clear, there aren’t any earnings reports out yet, but investors are looking at market data from third-party analysts that indicate slowing growth for energy drinks. At an industry conference this week, CEO John Fieldly said he thinks the entire energy market would be in decline without Celsius.
What investors are struggling with is the right price to pay for Celsius stock. After this week’s drop, shares are still trading for more than 10 times sales and 67 times earnings. That’s an incredibly high price for a consumer stock, but Celsius has also been a growth engine that’s earned a hefty multiple.
What to do now
As a Celsius shareholder who thinks long-term, I’m looking at this pullback as more of a buying opportunity. Shares are still up over the past year and the pop this spring wasn’t driven by great results, it was just a trading phenomenon.
What I see in the business is still a growth story, although there will be volatility depending on distributor inventory, the speed at which stores reset shelves, and when international expansion takes place. What I’m more worried about are the long-term trends and a company that’s still growing over 30% annually is a good bet even at a lofty valuation.