The Alpine Ski World Cup kicks off the season this weekend. Red Bull will be omnipresent at the opening races on the glacier in Sölden, Austria. Alpine star Marcel Hirscher, who is about to make his comeback, will be among the athletes supported by the energy drink empire, as will the two Swiss piste aces Loïc Meillard and Marco Odermatt. Compared to the industry leader from Austria, Celsius is far less well-known. Nevertheless, the US beverage manufacturer also relies on the appeal of sport. As a sponsor of the World Pro Ski Tour, the company, which was founded 20 years ago, is on the slopes of renowned US ski resorts. In Formula 1, which is dominated by Red Bull, Celsius supplies the Ferrari team with its small, colorful cans. The fitness drinks filled in these cans, whose recipe includes green tea extract, ginger and guarana seeds, appeal to consumers' tastes. Since the beginning of 2022, Celsius has been able to expand its market share in the USA from less than 4% to 11.5% recently. The distribution partnership agreed with PepsiCo two years ago also helped.
Until a few months ago, Celsius was also doing very well on the stock market. In mid-March, the Nasdaq-listed share reached an all-time high of just under USD 100. But then the high-flyer turned sharply downwards. Compared to the top, Celsius has lost around two thirds of its value. The correction was accompanied by a significant slowdown in operational growth. Although Celsius reported record-high sales of USD 402 million for the second quarter of 2024, this represented a year-on-year increase of just 23%. In the full years 2023 and 2022, the growth rate was more than 100% in each case. Despite increasing market share, Celsius is therefore not immune to a slowdown in the energy drinks trade. Partner and shareholder PepsiCo remains calm. "I think everyone needs a little boost of energy during the day," said CEO Ramon Laguarta on a recent conference call. At the moment, he believes that economic headwinds are blowing in the face of beverage manufacturers in the USA. As soon as consumer confidence improves, consumers will return to the shopping centers and reach for energy drinks. "We like this partnership," Laguarta made clear at the beverage and snack giant's latest results presentation. In any case, he would like to further expand the distribution network for Celsius cans.
Investors will find out how his colleague John Fieldly assesses the situation on November 5. On the day of the US elections, the CEO of Celsius will present figures for the third quarter of 2024. On the one hand, the focus is likely to be on the development of sales and market share. Global expansion should also be an important topic. In April, the company began selling its energy drinks in the UK and Ireland. The high-energy drinks are now also available in France, Australia and New Zealand. Of course, the expansion of international sales costs money. Analysts expect Celsius' earnings per share to have stagnated in the third quarter of 2024 compared to the same period of the previous year. The consensus also indicates a stable profit for the year as a whole, before earnings are expected to increase significantly in 2025 and 2026.
The term of the new soft-callable barrier reverse convertibles on Celsius Holdings ends after just one year. The coupon payment for this issue is linked to a trigger level: If the underlying asset is quoted above this price on the observation date, which occurs every three months, the payout is made. If this calculation does not work out, the payment can be made later thanks to the memory effect. As soon as Celsius meets the requirement on one of the following key dates, Leonteq transfers the current coupon and all coupons not previously paid. The potential return is impressive: In the product currency CHF, the conditional coupon amounts to 17% p.a. With the USD variant, an annualized return of 22% is even possible. The trigger is at a low 50% of the initial level. The barrier is fixed at the same level. Due to the European design of these BRCs, it is only tested at maturity. As long as Celsius is not trading 50% or more below the starting price, investors receive the full denomination.
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