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🤝 Insiders: Beverage Industry Stock Picks
Beverage Industry Stocks to Watch
Short Squeez
October 03, 2023
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“If I eat 2700 calories a day, a quarter of that is Coca-Cola. I drink at least five 12-ounce servings. I do it everyday. I am one-quarter Coke.”  — Warren Buffett
If you had to guess the best-performing stock of the past 25 years, what would you pick?
Tech seems like a solid guess, but here’s a hint - it’s not $NVDA, $AAPL, $GOOGL, or anything even remotely close to that.
Rather, it’s an energy drink company that takes the crown with a 131,150% gain since September 1998.
There’s a beverage stock for everyone - from the aggressive growth investor to even the retiree looking for dividend stocks.
And this week we’re giving a rundown of our top 5 favorite stocks.
But first, we wanted to remind you our Financial Modeling Course is dropping on Wednesday, October 4th. As an insiders member, you get 50% off on all courses, using the code INSIDERS.
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Top Beverage Stocks
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1. Celsius Holdings, Inc. ($CELH)
Business Overview
If you’re a fitness enthusiast looking for a drink that can hydrate you during your Equinox or Barry’s workouts, or even just a burned-out investment banker looking for that energy spark, you’ve probably heard of Celsius - the embodiment of fitness in a can.
Celsius is an energy drink company, but with a twist - they’re geared at boosting fitness performance.
The company’s signature offering is its Celsius branded energy drink, which accelerates metabolism, burns calories and provides energy. But Celsius offers other beverages that contain caffeine and even BCAAs.
Celsius was founded in 2004 but really took off in the 2020s
And in the fiercely competitive health and fitness industry, Celsius has managed to carve a niche for itself.
Catalysts
Celsius’ growth prospects are tantalizing.
A key growth partnership? Partnering with PepsiCo, a behemoth in the beverage industry, for distribution. The partnership is geared at boosting Celsius’ efficiency and growth prospects.
And it looks like it’s paying off already. In Q2'23, Celsius hit a record high of $326 million.
And as Celsius strides out of its development phase, it’s poised to join the exclusive $1 billion annual sales club.
Celsius still has plenty of room to grow. It’s the third most popular company in the U.S. energy drink market (behind Red Bull and Monster) and boasts an 8.6% market share.
Analysts project Celsius to grow revenues by a staggering 70% in 2023, while its key rival Monster, in comparison, is merely expected to grow by a pedestrian 13.1%.
Key Figures $CELH (as of 10/1/2023)
Current Price: $171.60
Wall Street Ratings
Analysts: 10 Buy, 1 Hold
Median Target Price: $212.00 (24% premium)
Revenue: $952M
Market Cap: $13.19B
EV / NTM EBITDA: N/A
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2. The Coca-Cola Company ($KO)
Business Overview
The Coca-Cola Company has almost become synonymous with capitalism. The global beverage behemoth has been quenching investors’ thirst for profits for decades and is one of Warren Buffett’s favorite investments.
Coca-Cola is much more than just a soda company. The company also dabbles in sports drinks, juices, and even bottled water. You might not realize that some popular brands like Sprite, Fanta, and Minute Maid are all owned by Coca-Cola.
Catalysts
Coca-Cola is one of Warren Buffett’s staples, and he famously said he’ll never sell a share.
The reason why? Coca-Cola has built an economic castle, and its key value add for investors is that it's the stock that's built to last.
There’s no doubt - $KO may not have those eye-popping 200% to 300% annual gains, but there’s a good chance it will still be around for you 30, 50 years from now.
Coca-Cola's EPS has tripled over the past 25 years. Coca-Cola is one of the best stocks at chugging along, steadily increasing dividends to investors.
With a market share of 43.7% in the global non-alcoholic beverage market, Coca-Cola's moat is very deep.
And $KO has survived it all - even over the past five years, they’ve stood tall amidst a pandemic, wars, trade tensions, and economic roller coasters..
In the recent quarter, they not only smashed organic revenue expectations but also beat earnings per share (EPS) by 6 cents and revenue by $250 million.
And in a world where prices are soaring, companies with pricing power are golden. And not many companies can compete with Coca-Cola when it comes to pricing power and brand value.
Coca-Cola's brand is worth a staggering $106.1 billion, and it's been growing at a CAGR of +5.69% since 2006. That's right, even in an era of fad diets and health-conscious consumers, people can't get enough of the classic red can.
Key Figures $KO (as of 10/1/2023)
Current Price: $56.00
Wall Street Ratings
Analysts: 19 Buy, 6 Hold
Median Target Price: $70.00 (25% premium)
Revenue: $44.1B
Market Cap: $242B
EV / NTM EBITDA: 17.5x
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3. PepsiCo, Inc. ($PEP)
Business Overview
PepsiCo is known for being Coca-Cola’s biggest competitor. But in addition to their classic Pepsi drink, they also have an ensemble cast of snacks and drinks that generate profits and value for shareholders.
You might know $PEP from its Pepsi, but don’t count out its Lay's potato chips, Gatorade, Tropicana, Quaker Oats – they've got a little something for everyone. From carbonated drinks to crispy delights, from juices to sports drinks, PepsiCo has built a stock that provides shareholders with a one-stop shop for anything snacks.
When it comes to diversification, PepsiCo's got it down to an art. They've mastered the art of juggling both snacks and drinks.
Catalysts
PepsiCo has been on a revenue rollercoaster, and in the past year, they've added $7 billion to their revenue. Net income for PEP has also been trending positively, especially in the second quarter of 2023.
$PEP has mastered the art of both diversification and growing revenue for shareholders. In 2013, the company was raking in $66.415 billion in revenue. Fast forward to their 2022 report, and you'll see a whopping $86.392 billion.
Their most recent quarterly report? A 10.4% revenue increase compared to the same quarter last year.
PepsiCo's stock has outperformed its rival, Coca-Cola YTD. And thanks to $PEP’s diversification, the company is like a chameleon, adapting to changing consumer behavior and growing its ever-increasing revenue and earnings.
Key Figures $PEP (as of 10/1/2023)
Current Price: $169.44
Wall Street Ratings
Analysts: 9 Buy, 11 Hold, 1 Sell
Median Target Price: $201.50 (19% premium)
Revenue: $90.1B
Market Cap: $233B
EV / NTM EBITDA: 19.4x
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4. Monster Beverage ($MNST)
Business Overview
If you had to pick the best-performing stock of the past 25 years, chances are you’d pick Apple, Google, Nvidia, or some other tech stock.
But you’d be mistaken - in a world where tech giants snatch headlines, Monster Beverage ($MNST) has quietly transformed into the Cinderella of the stock market.
It turned a mere $0.05 investment in September 1998 into a 131,150% gain, with shares now soaring at a princely $53.
That gain clocks in at a staggering 30% over a quarter-century.
So, what's the secret sauce behind Monster Beverage's meteoric ascent? It’s all about the branding. Monster didn't just peddle beverages; they sold an entire lifestyle. It was all about that pulse-pounding, macho charisma.
Fast-forward to 2023, and Monster Beverage is evolving. Once the bro-centric choice, they're broadening their horizons and tweaking their brand strategy, introducing new labels and embracing acquisitions to charm female consumers.
If you’re going to sit through an NFL game this fall, chances are you’ll eventually see a commercial for $MNST. The company has become one of the most aggressive marketers and has secured endorsement deals from Tiger Woods, as well as many NASCAR drivers.
Catalysts
Monster Beverage dominates the market thanks to its lineup coming in more flavors than you can count, and they've carved out a nice chunk of the fiercely competitive energy drink market.
And with strategic acquisitions and expansion plans, the company is poised for future growth.
Monster Beverage is throwing its hat into the ring by announcing new products, like Monster Hydro (for the gym rats), Reign Total Body Fuel (for the fitness freaks), and a lineup of coffee-infused energy brews (for the caffeine connoisseurs). They’re also adopting low-calorie and low-caffeine versions, poised to expand revenue.
$MNST is even venturing into the alcohol world.
Since starting out as a humble energy drink company in southern California, the company has planted their flag in over 120 countries.
And even in the face of rising prices, MNST is flexing its financial muscles with record-breaking sales and a tough pricing strategy.
And $MNST is outsourcing some of its operations to improve margins and focus on growth. For instance, in 2022, they handed off the manufacturing of their energy drinks to third-party bottlers and contract packers. Monster sources ingredients from suppliers, and these third parties add the necessary bits and package the goods. They've also outsourced distribution, cozying up with Coca-Cola ($KO) giant.
In the second quarter of this year, Monster pulled off a strong feat with net sales skyrocketing to $1.85 billion, a 12.1% increase compared to the same period in 2022.
The gross profit margin danced up to 52.5%, all thanks to some clever pricing moves, lower costs, and increased spending on aluminum cans (who knew cans could be so valuable?).
Operating income? That swelled up by 14.4% to a princely $523.8 million compared to last year. As if that weren't enough, net income went into turbo mode, surging by a whopping 51.4% to $413.9 million, resulting in a diluted earnings per share increase of 52.8% to $0.39.
Key Figures $PEP (as of 10/1/2023)
Current Price: $52.95
Wall Street Ratings
Analysts: 17 Buy, 8 Hold
Median Target Price: $63.00 (19% premium)
Revenue: $6.7B
Market Cap: $55.5B
EV / NTM EBITDA: 27.7x
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5. ETF - The PBJ Invesco Food & Beverage ETF ($PBJ)
Business Overview
$PBJ is perfect for investors who want exposure to the food and beverage industry as a whole.
$PBJ is diversified, and betting on food/drinks seems like a good idea - Americans are always going to need to buy food.
Key Figures
Key Figures $PBJ
Inception Date: 6/24/2005
Expense Ratio: 0.63%
AUM (Net Assets): $210.0M
1-Year Return: (0.8%) (compared to S&P 500 +16.6%)
Return Since Inception: +269.1% (compared to S&P 500 +258.5%)
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