Replies to post #6675 on Celsius Holdings Inc (CELH)

[NewJerichoMan]

Net Loss is highly correlate to sales.

Grammar aside champ, you are correct about this but I don't think you understand why. Those losses aren't random. They aren't magically losing low ten digits (percentage-wise), year-over-year, on accident. It's by design. They are spending for rapid revenue growth because they have the capital backing and cushion to do so.

If the goal was profits, then the revenue growth rate would suffer; but as publicly stated by the company, on numerous occasions, the main goal is revenue growth.

As far as why now? Have you looked around the beverage industry? People aren't just talking healthy, they're spending healthy. Since 2009, the list of brands that have seen rapid growth are not insignificant. A few of the notables are Bai, Sparkling Ice, La Croix, KeVita, etc. 2 of those brands were start-ups. Two were long-time brands where the market came to them. Celsius fits in that latter category, a science-backed product that helps in weight loss. Think that might catch on in a nation full of fatties?

If you don't think the products and/or brands are winners, then c'est la vie. But the business paradigm is tried-and-true within the beverage industry, grow as fast as you can, and hope to get taken out.

$14M for Q4!?! From your mouth to God's ears.

[Toxic Avenger]

You are spot on. I watched this happen to Skinny Water, a competitor to CELH that eventually went under. They lacked an angel investor like Carl.

There is of course always the possibility that a large company will come along and buy up CELH (though I doubt it would be at much, if any premium to the current market cap), but the odds are long.

They have enough cash to keep buying growth for another few years, but the problem is that increased sales requires increased SG&A and even when you stop buying sales, that higher SG&A number rarely drops much.

Gross margin is also a difficult number to hang your hat on because in most cases, co-op advertising, slotting fees, etc. end up in SG&A, which makes gross margins look higher than they actually are.

How long until investors tire of waiting for profits that seem to be further and further away is anybody's guess. They've been patient so far, but that's largely due to the massive holdings by a few investors. But with a P/S ratio over 7 (TTM), it's hard to see this moving up over the long haul.