Table of Contents
Lululemon Athletica (NASDAQ: LULU) And Celsius companies (NASDAQ: CELH) are two consumer brands that have become extremely popular over the years. Both stocks have been on a big run in recent years, although both have seen big sell-offs this year.
Let’s take a look at why these stocks have been selling off and why they could both be poised for a big recovery in the second half of this year and beyond.
1. Celsius Companies
Energy drink maker Celsius has been very busy over the past five years, until about the end of May. Now the liquor stock suddenly sees the stock price almost halved from its all-time high.
The company’s success comes from carving out an attractive niche in the energy drink market by appealing to customers with a less aggressive aesthetic: differentiated flavors like Peach Vibe, no-sugar options in a high-sugar category, slimmed-down cans and a watered down marketing message. A distribution agreement with PepsiCo in 2022, meanwhile, the company achieved widespread distribution among retailers, especially in the important supermarket channel.
However, after three consecutive years of revenue growth of 100% or more, that growth has unsurprisingly started to slow. The company is now largely fully distributed in the US. First quarter revenue growth was strong at 37%, but ultimately a huge slowdown from Q4’s 95% revenue growth. Meanwhile, in the channels tracked, Nielsen data shows growth continuing to slow week over week, down to 13% in the last week of June, although the comparison was affected by the timing of the July 4 holiday.
Despite slowing growth in the channels it tracks, Celsius still has some opportunities that could help the stock recover this year and beyond. International growth remains a great opportunity for the company. It’s hardly an improvement in service in terms of penetration, having just entered the UK and Australian markets. It also offers the opportunity to increase the number of items per store, better cooler placement and grow in untracked channels.
Trading at less than 35 times 2025 earnings estimates and with a price/earnings-to-growth (PEG) ratio of 1 times, the share seems attractively valued for a growth share that still has a number of good opportunities ahead. If the company can expand internationally and carve out a niche similar to what it has in the US, the stock should perform well in the long term.
2. Lululemon Athletica
Lululemon stock has had a rough year, with shares down more than 40% year to date. Investors are nervous about increased competition from companies like Alo and Vuori, and possible changes in fashion. Cautious comments about the US consumer in March when it reported its fourth-quarter financial results, combined with the departure of its Chief Product Officer in May, only added fuel to the fire.
Last quarter, the company saw flat same-store sales in the U.S., but a 29% increase in international same-store sales led to an overall 7% increase in same-store sales and a 10% overall sales increase.
International remains one of the biggest opportunities for Lululemon going forward, and so far it appears the brand is resonating with international customers. However, the company also has the ability to reignite growth in its North American markets through product innovation and category expansion.
The brand appears to remain strong, and the potential of an improved US consumer and a strong back-to-school season could also bode well for growth. Early indications are that the back-to-school shopping season is off to a good start Adobe Analysts are taking notice Amazon saw Prime Day sales for children’s clothing increase 165%, while other back-to-school items like backpacks and school supplies rose 216%. Other data points from the National Federation of Retailers, including container volumes in May and strong retail sales in June, also point to a strengthening retail environment.
With a price-to-earnings (P/E) ratio of less than 18, based on 2025 estimates, Lululemon is trading at one of the cheapest valuations in its history.
Given the valuation, the opportunity ahead, and the potential for a strong back-to-school shopping season, the apparel stock could see a strong recovery in the second half of this year and beyond.
Don’t miss this second chance at a potentially lucrative opportunity
Have you ever felt like you missed the boat on buying the most successful stocks? Then you would like to hear this.
On rare occasions, our expert team of analysts provides a “Double Down” Stocks recommendation for companies they think are about to pop. If you’re worried that you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:
-
Amazon: If you had invested $1,000 when we doubled in 2010, then you have $20,625!*
-
Apple: If you had invested $1,000 when we doubled in 2008, you would have $42,385!*
-
Netflix: If you had invested $1,000 when we doubled in 2004, you would have $341,555!*
We’re currently issuing ‘Double Down’ warnings for three incredible companies, and another opportunity like this may not happen anytime soon.
*Stock Advisor returns July 15, 2024
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Fool holds positions in and recommends Adobe, Amazon, Celsius, and Lululemon Athletica. The Motley Fool has one disclosure policy.
2 growth stocks that could skyrocket in the second half of 2024 and beyond was originally published by The Motley Fool