Ford Motor Co (NYSE: F) is capitalizing on its fleet business, turning what was once considered a “dirty” word in the automotive industry into a major competitive advantage.

Under the leadership of CEO Jim Farley, the segment known as “Ford Pro” has generated $184.5 billion in revenue and $18.7 billion in adjusted earnings since 2021.

This shift challenges the traditional view that fleet sales are less profitable and a negative for legacy automakers.

In a recent earnings call, Farley highlighted the success of Ford Pro, which performed exceptionally well despite an overall down second quarter for the company.

“No other company has Ford Pro. We intend to fully press that advantage,” Farley told investors.

Despite Ford’s stock price dropping about 30% after missing earnings estimates on July 24th, the fleet business remains a bright spot.

Fleet sales: Ford’s hidden gem

Ford’s fleet business has garnered positive attention from Wall Street, with analysts dubbing it a “hidden gem” of the legacy automaker. Some even refer to the Pro segment as “Ford’s Ferrari.”

While rivals General Motors (GM) and Stellantis have restructured their operations to boost fleet sales, their commercial sales are expected to decline this year compared to 2023.

Conversely, Ford’s commercial volumes are up 7% from last year, according to Wolfe Research.

The investment firm predicts Ford will earn $9.5 billion from its fleet business this year, surpassing the combined $9.0 billion expected for GM and Stellantis.

S&P Global Mobility estimates Ford’s share in new fleet vehicle registrations since 2021 at around 30%, significantly ahead of GM’s 22% and Stellantis’ 9%.

Bank of America analyst John Murphy is bullish on Ford

Ford Pro’s success is a key reason why Bank of America analyst John Murphy is bullish on Ford shares. His $22 price target suggests the stock could more than double from its current position.

Murphy sees potential upside in Ford Pro’s volumes as well as its software and services.

He notes that Ford Pro makes up about 80% of Ford’s software subscriptions, with an attach rate of only 12%, projected to grow to over 35% in the next few years.

Ford aims to leverage its fleet and commercial segment to achieve $1.0 billion in software and services sales by 2025.

Additionally, Ford stock offers a lucrative dividend yield of 5.98% at the time of writing.

Ford’s strategic focus on its fleet business contrasts sharply with the approaches of its competitors.

While GM and Stellantis face challenges in maintaining their commercial sales, Ford’s proactive investment in its fleet segment and commitment to software and services set it apart.

This approach not only secures immediate revenue but also positions Ford to capitalize on future market trends.

Despite the broader market challenges and recent stock performance, Ford’s fleet business, under the “Ford Pro” banner, is proving to be a robust growth driver.

CEO Jim Farley’s vision and the company’s strategic investments are paying off, making Ford a compelling consideration for investors.

As the automotive industry evolves, Ford’s innovative approach to fleet sales and commitment to software and services could ensure its continued success and market leadership.

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Global markets experienced a significant upheaval as traders reacted to recent economic data, unwinding bets that had dominated much of the year.

Japan’s Topix index suffered a dramatic fall of more than 12%, marking the most substantial sell-off since the “Black Monday” crash of 1987.

This selling wave extended into US and European markets, with Wall Street’s S&P 500 dropping around 4%.

Why the stock sell-off?

The primary catalyst for this market turmoil was recent economic data, which challenged the prevailing belief that global policymakers, particularly the US Federal Reserve, could cool inflation without severe collateral damage.

The most striking data came from the US jobs report released on Friday, which indicated a much sharper slowdown in hiring than anticipated.

This report heightened fears that the US economy is under significant strain due to high borrowing costs.

Corporate executives have noted that consumer spending, a critical driver of the US economy, is beginning to decline.

“Entering this year, investor expectations were for a ‘Goldilocks’ outcome,” said JPMorgan equities strategists.

However, this optimistic narrative is now being “severely tested.”

Goldman Sachs revised its forecast over the weekend, now estimating a one-in-four chance of the US entering a recession within the next year, up from a previous 15% likelihood.

Signs of economic distress are also evident in other regions, with eurozone business surveys highlighting the impact of geopolitical tensions, weaker global growth, and fragile consumer confidence.

Meanwhile, China’s dominant manufacturing sector showed signs of easing activity in the three months leading up to July.

Severe market ructions explained

Global equity markets had been on an upward trajectory, buoyed by hopes of a “Goldilocks” economic scenario and a surge in US tech stocks driven by enthusiasm for artificial intelligence technology.

The S&P 500, considered the world’s most critical equities barometer, had rallied nearly 20% from the start of the year, reaching a record high on July 16.

However, market pullbacks are typically swifter than the gains. Since its July peak, the S&P 500 has fallen more than 9%.

The rise in equities had also made stocks appear more expensive, with the S&P 500 trading at approximately 20.5 times expected earnings over the next 12 months, compared to an average of 16.5 since 2000, according to FactSet data.

The VIX index, often referred to as Wall Street’s “fear gauge,” spiked to 50 points from 16 points just a week ago, the highest level since the 2020 COVID-19 pandemic, indicating that more market volatility could be ahead.

The tech sector’s Magnificent 7 have a pivotal role

Investors have been particularly concerned about the heavy reliance on a small number of tech stocks, known as America’s “Magnificent Seven.”

Apple, Microsoft, Alphabet, Amazon, Tesla, Meta, and Nvidia accounted for 52% of the year-to-date returns on the S&P 500 through July, according to Howard Silverblatt, a senior analyst at S&P Dow Jones Indices.

These stocks are now under pressure, transforming their once-positive market influence into a significant factor in the sell-off. The tech-heavy Nasdaq Composite index has dropped around 14% from its July peak.

The tech sector’s troubles were exacerbated by news that Warren Buffett’s Berkshire Hathaway had halved its stake in Apple as part of a broader shift away from equities, leading the billionaire investor to offload $76 billion in stocks.

Other tech-related concerns have also surfaced, such as Intel’s announcement to cut 15,000 jobs in a sweeping turnaround plan, causing its stock to tumble about 30% last week.

Similarly, anxiety over the sustainability of an AI-driven boom in demand for specialized chips has weighed on sentiment, with chipmaker Nvidia falling 35% from its June highs.

Japan’s stock market hit hardest

Japan’s stock market has borne the brunt of the sell-off, erasing all its gains for the year following a plunge on Monday.

This decline was triggered by a rapid rise in the yen after the Bank of Japan raised its main interest rate to 0.25%, the highest level since the global financial crisis of late 2008.

This hawkish stance contrasted with expectations of a dovish shift in US monetary policy, leading to an unwinding of “carry trades” where investors borrow in low-rate countries to invest in higher-rate ones.

The yen’s more than 12% rally against the US dollar since the end of June to ¥142.5 represents a seismic move in currency markets.

A stronger yen poses a significant headwind for Japan’s exporter-heavy stock benchmarks.

Japan’s stock market, heavily exposed to the global economy, has become a primary target for risk reduction when global funds shift into panic mode.

Despite recent bullish rhetoric about Japan’s economic resurgence and the all-time highs reached by Tokyo stocks in July, this story had fragile support.

Domestic institutions and individuals lacked strong conviction in the market, leaving the heavy lifting of the rally to foreign investors, who can exit the market swiftly when sentiment turns.

What’s the fault of the US Federal Reserve?

The Federal Reserve’s decision last week to hold interest rates at a 23-year high above 5% was in line with investor expectations.

However, the weak July jobs report, which showed slower hiring and a rising unemployment rate, has spread panic that the Fed might have delayed lowering borrowing costs for too long, increasing the risk of a US recession.

Fed chief Jay Powell may face a challenging situation if market instability continues.

Markets are now pricing in 1.25 percentage points of Fed cuts, equivalent to five quarter-point reductions, by the end of the year.

Traders are also considering the possibility that the US central bank may be forced to react with an unscheduled emergency cut before its next meeting in September.

Global markets are undergoing significant turbulence due to rising concerns about the US economy’s trajectory. The sharp sell-off in Japan’s Topix index and the broader declines in US and European markets underscore the growing fears among investors.

Economic data pointing to a slowdown in hiring and consumer spending, coupled with high borrowing costs, has heightened recession risks.

The outsized influence of tech stocks and the contrasting monetary policies of major economies have further compounded the market volatility.

As traders brace for more potential turmoil, the focus remains on how global policymakers, particularly the US Federal Reserve, will navigate these challenging economic conditions.

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Lockheed Martin Corp (NYSE: LMT), the aerospace and defense major, recently received a substantial upgrade from RBC Capital, elevating the stock to “Outperform” from “Sector Perform” with a revised price target of $600, up from $500.

F-35 delivery resumption a major boost

This optimistic revision anticipates more than a 9% upside, driven by positive sales growth dynamics and an attractive valuation.

The analysts pointed to Lockheed’s enhanced delivery schedules of the F-35 fighter jets and a robust demand for its advanced missile systems as key drivers of this renewed confidence.

The upgrade from RBC is underpinned by the successful resumption of F-35 deliveries last month, which are critical for boosting Lockheed’s cash flow.

RBC estimates suggest delivery of 95 F-35 jets for 2024, indicating strong production capabilities and inventory management.

This resurgence in F-35 deliveries is vital, not only for revenue but also for maintaining Lockheed’s competitive edge in aerospace defense.

Simultaneously, Lockheed’s Missile and Fire Control (MFC) segment is projected to see continued growth.

This unit, responsible for systems such as HIMARS and Javelin missiles, benefits directly from increased US and allied military spending, which is being driven by heightened global security concerns.

RBC’s analysts, after spending two days with Lockheed’s management, expressed high confidence in the sustained growth of the MFC segment, supported by investments in several defense programs.

Bank of America upgraded Lockheed to ‘Buy’

Other major financial institutions, including Bank of America and TD Cowen, have similarly optimistic views. On July 30,  Bank of America upgraded Lockheed to “Buy,” projecting a price target of $635, recognizing the accelerated earnings potential amid growing F-35 deliveries and strong global demand.

TD Cowen’s recent upgrade to “Buy” with a $560 price target following the Department of Defense’s approval of resumed F-35 deliveries also plays into the broader narrative of recovery and growth.

They specifically noted the restart of deliveries under the Technology Refresh 3 (TR-3) program, which enhances the F-35’s technological capabilities, ensuring Lockheed remains at the forefront of military aviation technology.

Lockheed’s Q2 earnings

This slew of upgrades and positive analyst reports comes on the back of Lockheed Martin’s strong Q2 earnings report. The company posted a Non-GAAP EPS of $7.11, outperforming expectations by $0.66, with revenues up 9% Y/Y to $18.1 billion.

These figures not only beat analyst projections but also signify robust operational efficiency and growing market demand for Lockheed’s offerings.

Operational highlights include the substantial backlog of nearly $160 billion, reflecting ongoing and new contract engagements that are more than twice the annual revenue.

Lockheed’s segment results for the quarter further illustrate its impressive growth. The Aeronautics segment saw a 6% increase in net sales, while the Missiles and Fire Control segment reported a 13% rise, driven by heightened production of missile systems.

The Rotary and Mission Systems and Space segments also reported significant sales increases, underscoring the company’s diversified strength across multiple domains of defense technology.

The company’s strategic initiatives, including significant investments in digital technologies and AI, are enhancing its product offerings and operational capabilities.

This is evident from the integration of AI in platforms like the Aegis Combat System and advancements in hypersonic technologies, positioning Lockheed as a leader in next-gen defense technologies.

As Lockheed continues to expand its technological and operational footprint, its financial outlook remains strong. The company has raised its full-year guidance for sales, segment operating profit, and EPS, reflecting confidence in continued growth and profitability.

Considering Lockheed Martin’s strategic advancements, robust financial performance, and favorable analyst upgrades, the company is well-poetised for future growth.

These fundamental strengths provide a solid backdrop as we now turn to examine the technical aspects of Lockheed’s stock performance. Let’s delve into the charts to discern the potential trajectory of Lockheed Martin’s stock in light of its recent positive developments.

Bullish momentum after 2-year rangebound movement

After trading in a $400 to $500 range for more than two years, Lockheed Martin’s stock finally broke above the top end of that range last month after the company announced its Q2 earnings.

LMT chart by TradingView
Since then, the strong has been displaying strong bullish momentum across all timeframes, though it is facing some resistance trading above $550. Hence, investors who continue to remain bullish on the stock like a slew of analysts have two choices on their hands right now.

First, they can wait for the stock to retrace a bit more and buy it near the $520 level. Second, they can buy the stock if it gives a daily closing above $550.

Traders who have a bearish outlook on the stock must refrain from opening a short position unless it starts showing weakness, which will become clear if it falls below its 50-day moving average or the lower band of its 25-day Donchian channel.

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The CBOE Volatility Index or VIX, which throws up market expectations for volatility over the next 30 days surged to its highest level in four years as global equities fell sharply.

Investors use the VIX- dubbed as the ‘Fear Index’ to measure the level of risk, fear, or stress in the market when making investment decisions.

Based on S&P 500 index options, the VIX was up by more than 172% on Monday morning, touching levels above 63. However, it later cooled to levels of 55.

This puts the VIX up a whopping 340% from a month ago, implying the erasure of trillion dollars worth of market cap at the S&P over the last month.

VIX highest since pandemic

On Friday, the VIX had jumped to its highest level of the year after a troubling jobs report exacerbated Wall Street’s fears about a weakening economy.  

However, Monday’s spike was the highest the VIX has seen since March 2020, shortly after the Federal Reserve’s emergency actions during the Covid 19 pandemic, according to FactSet. 

The VIX rose as high as 85.47 in March 2020, according to FactSet.

Before the pandemic, the VIX had spiked this significantly during the 2008 financial crisis. On October 24, 2008, the VIX reached an intraday high of 89.53.

The VIX usually spikes during market turmoil or periods of extreme uncertainty, however, they can also often be short-lived.

Since the Covid sell-off subsided, the VIX has been subdued, often trading below 20.

The S&P inched much closer to the correction territory. 

Source: TradingView

Monday market mayhem and recession probability

US stocks fell sharply on Monday as part of a global market sell-off centered around US recession fears.

The prospect of a US recession has rattled global markets. Weak US jobs data released on the previous Friday exacerbated fears of an economic slowdown.

Investors were concerned that the Federal Reserve might have been too slow to respond to signs of cooling in the US economy and might need to cut interest rates.

According to Bloomberg, economists from Goldman Sachs have increased the probability of a recession in the US in the next year to 25% from 15%. They however also noted that there are “several reasons not to fear a slump”, despite a jump in unemployment, it added.

Japan’s Nikkei 225 plunged 12% in its worst day since the 1987 Black Monday crash for Wall Street. The yen’s appreciation against the dollar also impacted Japanese equities, adding to the market volatility.

This sell-off reflected broader concerns about global economic stability and was mirrored by declines in other Asian markets like India and South Korea.

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German luxury fashion house Hugo Boss has sold its Russian business to Stockmann JSC, a longstanding wholesale partner, for an undisclosed fee, the company said according to a Reuters report.

This move aligns Hugo Boss with numerous Western brands exiting the Russian market in response to the ongoing war in Ukraine.

Hugo Boss had suspended its retail operations in Russia shortly after Moscow’s invasion of Ukraine in February 2022.

The company also halted its e-commerce activities and stopped all advertising in the Russian market.

Confirming the sale to Reuters, Hugo Boss said,

“We can confirm that our Russian subsidiary has been sold to Stockmann JSC – a company belonging to one of Hugo Boss’s long-standing wholesale partners in the country.”

Deal details and financial terms

While neither party disclosed the financial terms of the deal, Russian regulations mandate that foreign companies sell their assets at a minimum 50% discount.

According to Russian corporate filings, the transaction was finalized on August 2, with Stockmann JSC now owning 100% of Hugo Boss Rus, valued nominally at 40 million roubles ($470,588).

Stockmann JSC did not immediately respond to requests for comment.

Hugo Boss faced pressure from organizations like B4Ukraine, a coalition of civil society groups advocating for Western companies to cut ties with Russia.

Despite these pressures, Hugo Boss maintained that it was fulfilling its contractual obligations to its wholesale partners in Russia.

In April, the company stated,

“In terms of our wholesale business, we were fulfilling the contractual obligations to our partners. In this context, Hugo Boss is and has been complying with existing EU sanctions at all times.”

Ukraine invasion pushes many companies to pull out of Russia

Hugo Boss’s exit from Russia is part of a broader trend of Western brands leaving the Russian market due to the geopolitical ramifications of the Ukraine conflict.

In 2022, Ford Motor Company first suspended its operations in Russia and a few months later, exited the market through the sale of its 49% share in the Sollers Ford Joint Venture.

The automaker said it was “deeply concerned about the situation in Ukraine,” and noted it has “a strong contingent of Ukrainian nationals working at Ford around the world.”

Toyota also announced halting production in Russia and stopping exports to the country in 2022 in response to Russia’s invasion. The war particularly affected the company’s procurement of key materials and parts.

Last year, it was reported that the company’s St Petersburg plant may be transferred to the Russian state entity NAMI.

Others to have pressed the brakes on its Russian operations in varying capacities include Boeing and Airbus. Apple was one of the first manufacturers to halt its product sales in the country.

Airbnb too suspended operations in Russia and Belarus.

A report by Yale School of Management in January this year estimated that over 1,000 companies had publicly announced that they were voluntarily curtailing operations in Russia to some degree beyond the bare minimum legally required by international sanctions.

However, some companies continued to operate in Russia undeterred

For example, for American clothing company Guess and it has been business as usual.

Financial impact on exiting companies

A Reuters analysis published in March this year said that foreign companies which left Russia since it invaded Ukraine in 2022 lost $107 billion in the process of exiting the market.

The loss occurred due to writedowns and lost revenue because President Vladimir Putin’s regime implemented increasingly punitive measures for exiting firms, like selling their assets at a 50% discount and paying at least 10% of their sale proceeds to the federal budget.

Washington has called such payments “exit taxes”.

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Japanese stocks witnessed an unprecedented plunge on Monday with the Nikkei 225 index dropping almost 13% in its largest-ever single-day decline, sending shockwaves through global markets and raising concerns about a looming US recession. 

The broader Topix index also fell by up to 11%, erasing all its gains for the year. 

By Friday, the Nikkei 225 had already experienced its most significant one-day points fall since the 1987 crash, plummeting more than 4,600 points.

The market frenzy led to the suspension of trading in both Topix and Nikkei futures as they hit “circuit breaker” levels, which are designed to halt trading during extreme market volatility. 

This phenomenon was not isolated to Japan; similar circuit breakers were triggered in South Korea for the first time in four years.

Futures markets indicated that the sell-off in Japan could extend to Europe and the US, with investors bracing for renewed volatility driven by fears that the Federal Reserve might have been too slow in addressing signs of a cooling US economy, potentially necessitating interest rate cuts.

Bill Ackman, CEO of Pershing Square, said,

The Federal Reserve was too slow to raise rates. Now it is too slow to lower them.

Sell-off to de-risk?

Traders in Tokyo attributed the sell-off to a significant correction and de-risking move by global funds. 

The Japanese market, often seen as a bellwether for global trade, became a target for profit-taking amidst the de-risking trend. 

The yen’s strength, having surged by about 9% since mid-July, further compounded the impact on Tokyo equities.

“The Japanese market is seen by global investors as a warrant on global trade,” said the head of a global pension fund in Japan as quoted by the Financial Times.

So if you are in severe de-risking mode, as many investors are now due to US recession fears and geopolitics, it makes sense to take profits in a Japanese market that has performed well this year.

Ripple effects across Asia and the world

The sell-off in Japan was echoed across other Asian markets.

South Korea’s Kospi benchmark dropped over 4% in early trading, while Australia’s S&P/ASX 200 fell almost 3%. 

Taiwan’s main stock market index declined more than 6%. Weak US jobs data from Friday exacerbated market pressures, as investors continued to flee from expensive technology stocks. 

In India, the BSE Sensex was trading 2.91% lower, down 2,358 points, while the Nifty50 was trading 2.88% lower at 11:43 am, down 712.50 points.

The Nasdaq index fell into correction territory, and haven Treasuries rallied sharply

Shifting investor sentiments and future implications

The Vix index, a measure of expected US stock market turbulence known as Wall Street’s “fear gauge,” spiked to 29 points on Friday, the highest level since the US regional banking crisis in March of the previous year. 

The tech-heavy Nasdaq Composite ended the week 3.4% lower and has declined more than 10% since July’s all-time high.

Treasuries rallied, with the yield on the US 10-year note hitting its lowest level since December at 3.82%.

On Saturday, Warren Buffett’s Berkshire Hathaway revealed it had halved its Apple holdings in the second quarter, raised its cash position to a record $277 billion, and bought Treasuries.

The recent turbulence extended to the cryptocurrency market, with Bitcoin’s price falling more than 8% to $54,000, and Ether’s price dropping nearly 17%.

Investors’ concerns were heightened by the Federal Reserve’s decision to keep rates on hold, leading to speculation that the central bank might have erred by not cutting rates sooner.

JPMorgan economists joined other Wall Street strategists over the weekend in calling for the Fed to reduce rates by 0.5 percentage points at its next two meetings. 

Srini Ramaswamy, JPMorgan’s managing director of US fixed income research, expressed a “bullish” outlook on volatility given the newfound uncertainty around interest rates and summer market illiquidity.

Madhavi Arora, Lead Economist, Emkay Global Financial Services, said,

A combination of higher long-term yields in Japan, an unattractive hedge ratio for Japanese corporates on overseas investments and a stronger yen, driven by other factors more than a hawkish BoJ will cause a repatriation of capital into Japan. This may cause the global bond term premia to rise.

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Apple is gearing up for the release of the highly anticipated iPhone 16 series. Speculations are rife regarding the launch dates, new features, and strategic moves by the tech giant.

Industry insights from Bloomberg’s Mark Gurman suggest that Apple has opted for a different approach this year, focusing on a phased rollout of features.

September announcement and October features upgrade

Apple is expected to announce the iPhone 16 series on Tuesday, September 10, 2024.

The pre-orders will likely begin shortly after the announcement, with the official sale starting on Friday, September 20, 2024.

However, the much-talked-about Apple Intelligence features will not be available immediately. Instead, users will have to wait until October to upgrade their new hardware to iOS 18.1, which will enable these AI-driven functionalities.

Historical context and strategic shift

In 2011, Apple delayed the launch of the iPhone 4S to ensure that iCloud and Siri were ready. This year, despite the Apple Intelligence feature not being ready until October, Apple will proceed with the hardware release in September.

This shift highlights Apple’s confidence in its product strategy and the importance of meeting the market’s expectations on time.

AI integration and hardware upgrades

The iPhone 16 series is set to emphasize AI capabilities, aligning with current tech trends.

The AI features, branded as Apple Intelligence, are expected to be the marquee selling points of the new iPhones. Although these features will not be available at launch, their October rollout will be a significant update for users.

Bigger displays and improved cameras

On the hardware front, the iPhone 16 Pro models will feature larger displays of 6.3 inches and 6.9 inches. Standard models will see slight redesigns, and all models will include a new capture button for enhanced photography controls.

The entire lineup will be powered by faster 3nm chips, ensuring superior performance.

Advanced camera systems

The iPhone 16 Pro will inherit the Tetraprism 5x optical zoom lens from the iPhone 15 Pro Max. Additionally, the Pro models are likely to feature a new 48MP ultrawide camera, offering significant improvements in photographic capabilities.

Battery and charging enhancements

Except for the iPhone 16 Plus, all models are expected to receive a battery capacity upgrade. The new lineup will also support faster wired and wireless charging speeds, addressing a common user demand for quicker and more efficient charging solutions.

Investor and consumer anticipation

The announcement and subsequent release of the iPhone 16 series are likely to have a significant impact on Apple’s stock price. The phased rollout of features, with a major AI update in October, could sustain consumer interest and drive sales over an extended period.

Competitive positioning

Apple’s strategic decisions reflect a keen awareness of the competitive landscape. By launching the hardware first and following up with a software update, Apple ensures it remains at the forefront of consumer technology, meeting immediate market demands while promising future enhancements.

Apple’s iPhone 16 series is shaping up to be one of the most anticipated releases in recent years, thanks to its focus on AI features and significant hardware upgrades.

The strategic decision to separate the hardware launch from the software feature rollout may prove beneficial, keeping consumer interest high and sustaining market momentum.

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Celsius Holdings (CELH) stock price has moved from one of the best-performing companies in the United States to one of the worst. The CELH share price has plunged by about 60% from its highest point this year. It slumped to its lowest point since May 2023, moving its market cap from over $23.6 billion to $8.9 billion, meaning that holders have shed over $14.7 billion.

Celsius Holdings has grown rapidly

Celsius, a leading manufacturer of energy drinks, has become the fastest-growing company in the beverage industry. Its drinks have gone viral, helping its annual sales jump from over $75.1 million in 2019 to over $1.38 billion in 2023. 

This growth accelerated after the company reached a deal with PepsiCo, the second-biggest energy drinks company in the world. Pepsi invested $550 million in Celsius and received the distribution rights for the drinks.

This is a win-win situation for Celsius and Pepsi. Celsius leveraged Pepsi’s wide distributions while Pepsi received a drink whose growth will mirrors Monster Beverage’s deal with Coca-Cola. That deal has turned Monster into the second-biggest company in the industry after Red Bull.

Concerns that this growth is slowing

The CELH stock price has tumbled as concerns emerged that the company’s growth was slowing. Recent data shows that search interest about Celsius Holdings and its drinks have dropped sharply in the past few months.

There are also concerns that the recent data by Nielsen showed that this growth is moderating. The most recent data showed that the company added its market share with a 15.2% increase. While this is a good metric, it was mostly because of its increased promotions. 

Therefore, Tuesday will be an important day for the company as it will publish its financial results. 

In the first quarter, the company said that its revenue rose by 37% in Q1 to over $355.7 million while its gross profit jumped by 605 to over $182.2 million. While this revenue growth was encouraging, it was much lower than what the company used to make in 2023. Its profits have also risen in the past few months. Gross margins rose by 740 basis points to 51.2%. 

Most importantly, there are signs that Celsius Holding’s international business is picking up steam, helped by its partnership with Pepsi. Its international revenue rose by 43% in the first quarter to $16.2 million. 

This division’s revenue came from Canada, UK, and Australia. It ends to expand its business to Australia, New Zealand, and France later this year. Based on its growth in the US, there are chances that it will become a highly growing company in these countries.

The average estimate is that Celsius Holding’s revenue rose by 20% in the first quarter to $393 million. If this number is accurate, it will confirm that the era of strong growth is ending. In the past, however, Celsius Holdings has managed to beat analyst estimates. 

For the third quarter, analysts expect that its revenue will be $460 million, a 19% increase from the same quarter in 2023. Also, for the year, analysts expect that its revenue will be $1.65 billion, a 25% increase from 2023.

Celsius Holding’s earnings per share will come in at 24 cents, higher than the 17 cents it made in the same period in 2023.  

Celsius valuation metrics

The ongoing Celsius Holdings stock crash has led to an improved valuation. The company’s market cap has dropped to $8.9 billion, which is reasonable for a company that has room to grow its margins.

Monster Beverage has a gross profit margin of 53.4% and a net income margin of 22.8% while Celsius has 49% and 18%, respectively. This valuation gap is understandable since Monster is a more mature company than Celsius. 

Celsius will continue growing its margins when it moves from growth at all costs to profitability. Monster has a GAAP PE ratio of 32 and a forward multiple of 29 while Celsius has 46 and 40, respectively.

Celsius can justify this valuation since it is growing at a faster rate than Monster. It also has a bigger addressable market since it is not available in most countries so far. 

Celsius stock price analysis

CELH chart by TradingView

I predicted the ongoing Celsius Holdings share price sell-off, citing its double-top chart pattern at $98.72 and the eventual drop below its neckline at $67.40. In most cases, a double-top pattern leads to more downside. 

The stock also formed a death cross pattern on July 17th as the 200-day and 50-day Exponential Moving Averages (EMA) crossed each other. This is one of the most bearish patterns in the financial market. 

On the positive side, the stock has gotten oversold, meaning that it could bounce back when it releases its results on Tuesday. If this happens, the CELH share price will likely rise to the key resistance at $50.

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