Celsius Holding Company (NASDAQ: CELH) It’s probably best described as a fashion stock, even though it’s classified as a consumer staples company. PepsiCo (NASDAQ: PEP) PepsiCo is a consumer staples stock, and it’s likely to be viewed as a boring industrial giant. But if you compare the performance of these two stocks, PepsiCo looks like the better choice for investors. And that’s before you consider its impressive long-term gains.
What does Celsius do?
Celsius produces energy drinks. Energy drinks are an attractive segment of Beverage sector, The company’s products have been widely accepted. But let’s step back and look at the broader beverage sector, which is much bigger than just energy drinks. Essentially, Celsius is a one-trick pony.
To be fair, the trick is working pretty well right now. The company claims its products accounted for 47% of the total growth in the energy drink category in Q2 2024. It ranked third in market share This is also the case during this period. While all of this is noteworthy, it does not take into account the limitations inherent in selling to only one segment of a broader market.
When a company’s performance declines or investors simply move on to another great investment idea, the stock is likely to fall quickly. For example: The stock is down more than 50% from its 52-week high. It’s worth noting that the peak was in May, meaning there was a very sharp decline in a very short period of time.
There’s nothing fundamentally wrong with Celsius, but if you think this is the stock that will make you a million dollars quickly, you may end up disappointed. A better option would be to get rich “slowly” with a larger, more diversified consumer staples company like PepsiCo.
Is PepsiCo better than Celsius?
The first thing to consider when comparing PepsiCo and Celsius is the stock gains each company has made. Since Celsius went public in early 2007, the stock is now up about 90%. That includes the sharp drop in the stock price over the past few months. Over the same period, PepsiCo’s stock is up 170%. While PepsiCo’s stock has also fallen over the past few months, the drop hasn’t been particularly dramatic.
But what happens when you look back? Since mid-1972, PepsiCo stock has risen more than 10,000%! However, unlike Celsius, PepsiCo pays a dividend. The current yield is around 3% and is backed by more than five decades of annual dividend increases (making PepsiCo the dividend queen).
Clearly, PepsiCo is no passing company—it has proven its ability to adapt and grow alongside the world around it. To truly understand investor returns here, we need to look at total return, which assumes dividends are reinvested. PepsiCo’s total return since mid-1972 has been 25,000%.
While this performance is historic, it’s important to understand the benefits of being a leader in the staples sector. PepsiCo has a portfolio of iconic brands, a global distribution network, and strong marketing skills. It’s tough to compete with PepsiCo, especially for a small startup. Here’s the kicker: When a smaller company makes a breakthrough, PepsiCo is big enough to pursue that company as an acquisition target. This allows PepsiCo to adjust its business over time to stay relevant to consumers. This is perhaps one of the biggest reasons why a diversified PepsiCo is likely to end up being a better investment over the long term than Celsius.
Slow and steady wins this race.
It’s entirely possible that Celsius will regain investor support and its stock will rise again, perhaps back to its 52-week highs, or even higher. That could lead to some attractive gains in the short term. However, in the long term, companies need to execute and grow over time, and Celsius is still a relatively young company.
On the other hand, PepsiCo has been brilliant at becoming a leader in the beverage industry and the broader consumer food sector. With its industry-leading position, the company has the ability to continue growing, albeit slowly, and buy smaller competitors like Celsius that have attractive brands.
Trying to get rich quick by riding the wave of hot stocks opens you up to steep declines like the one Celsius experienced. It’s much less risky to build a multimillion-dollar portfolio if you fill it with industry-leading names like PepsiCo.
Should you invest $1000 in Celsius now?
Before you buy shares in Celsius, keep the following in mind:
the Motley Fool Stock Advisor The team of analysts has just identified what they believe to be Top 10 Stocks There are 10 stocks for investors to buy right now… and Celsius wasn’t one of them. The 10 stocks that made the list could deliver massive returns in the years ahead.
Think about when Nvidia I made this list on April 15, 2005… If you invested $1,000 at the time of our recommendation, You will have $731,449.!*
Stock Advisor It provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. Stock Advisor The service has More than four times S&P 500 Index Return Since 2002*.
*Stock Advisor returns as of August 26, 2024
Robin Greg Brewer The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Celsius. The Motley Fool has Disclosure Policy.
Forget Celsius Holdings: This Company Has Made More Millionaires Originally posted by The Motley Fool