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SUMMARY
Parkev Tatevosian, CFA, presents a detailed discounted cash flow analysis of Celsius Holdings, concluding that the stock is significantly undervalued at its current price. He outlines the assumptions and calculations behind his fair value estimate and reiterates a buy rating based on long-term growth prospects.
MAIN POINTS
- Celsius stock has declined over 37% in 2026, prompting an evaluation of its fair value at around $29 per share.
- The discounted cash flow model is introduced, highlighting estimated free cash flows, cost of capital, and long-term growth assumptions.
- Forecasts project free cash flow growth from $400 million in 2026 to over $2 billion by 2035, with an 11.54% weighted average cost of capital and adjusted beta.
- Rising inflation and interest rates are discussed as factors influencing the risk-free rate and the minimum returns required by lenders.
- A 10% debt and 90% equity capital structure is applied, resulting in a company value of operations at $14.3 billion and a fair value per share of $59.
- With the current market price near $28, Celsius is deemed undervalued, leading to a reiterated buy rating based on solid long-term prospects.
DETAILED ANALYSIS
Celsius Holdings has experienced a significant decline in its stock price, falling over 37% in 2026 to approximately $29 per share. A comprehensive discounted cash flow (DCF) analysis is used to assess whether the current market price represents an undervalued opportunity. The DCF model incorporates three main components: projected free cash flows, the cost of capital, and a long-term growth rate.
Free cash flow is forecasted to grow from $400 million in 2026 to $1.66 billion by 2033 and $2.09 billion by 2035, reflecting expectations of continued international expansion and increased market share. The weighted average cost of capital (WACC) is set at 11.54%, with an after-tax cost of debt at 6.5% and a cost of equity at 12.1%. The company's beta is adjusted to 1.25 to account for anticipated higher risk in the future compared to historical levels.
The risk-free rate is based on a 10-year government bond yield, which has approached 4.6% amid rising inflation and expectations of tighter central bank policy. Inflationary pressures and expansionary fiscal policies globally are noted as key factors influencing these rates and the required returns for lenders. The capital structure assumption includes 10% debt and 90% equity, even though Celsius currently has no debt, to reflect the tax advantages and lower cost of debt relative to equity.
The present value of operations is calculated at $14.3 billion, and after adjusting for non-operating assets and zero debt, the intrinsic value per share is determined to be $59. With the stock trading near its 52-week low and well below this fair value estimate, the analysis concludes that Celsius is significantly undervalued. The strong long-term growth outlook supports a reiterated buy rating.
LINKS
- Special offer for The Motley Fool Stock Advisor.
- Parkev Tatevosian's book on evaluating publicly traded companies.
- Fiscal.ai investment research platform with a viewer discount.
- Webull investing platform sign-up with bonus shares.
- Subscription link for Parkev Tatevosian's free monthly Substack newsletter.
- YouTube channel membership for exclusive perks and spreadsheet access.