Wednesday, June 21, 2017

June 21st - Research Notes & Trade Blog



Significant Y-T-D Appreciation & Lofty Valuation Concerns Have Caused Us To Finally Sell The Last of Our Position in Celsius Holdings, Inc. (CELH)

It has been 9 years since we first discovered Celsius Holdings, Inc. (CELH). During that time the company has experienced a multitude of vicissitudes (did we really just say that?). Under CEO Steve Haley, the company gained recognition by appearing on many, many television news programs and garnering the attention of a few Hollywood celebrities; most notably Katie Holmes and Mario Lopez.

A reverse split, a secondary offering & listing on the NASDAQ initially sent the shares higher, but ultimately the company had little to no market share to justify the roll- out across a national distribution network.

Almost the entire hoard of cash the company raised through the secondary soon disappeared under the weight of heavy marketing and advertising expenses, slotting fess and a few other strategic failures.

We thought that the company was dead and buried. The company's shares were de-listed from NASDAQ and the company went dark; trading under the pink sheets stop sign, a warning to investors that the company was not providing any financial information or updates.  

Then in late 2010 a new management team, led by Gerry David and John Fieldly took over. They successfully rebuilt the company from the ground up and turned things around to the point where CELH actually was able to show a small profit in Q4 of 2014 and was cash-flow positive from operations in Q1 of 2015.

During this time we acquired a substantial position in the shares of CELH. We also managed to convince a few other investors of the potential for Celsius and one "whale" who acquired a large number of shares, along with us.

With CELH being a low-float, thinly-traded stock, and closely held by management, we didn't worry much about shares hitting the market when the price advanced significantly.

Over the years, a key to our success in investing and trading shares of this company was to always remain focused on valuation metrics, and not to get caught up in the hype that happens with so many other investors in Micro-cap companies.

In April of 2015, when it was announced that the company had raised $15.9 million, unsolicited, from a group of global icons, including Russell Simmons and Li Ka-Shing, the shares rocketed to a price of $3.55 

While clearly that was good news (although we weren't happy with the large discount to market price for the round of financing) we began to worry about valuation for CELH.

Our concerns persisted throughout the summer of 2015.

We expressed that concern in a number of posts to our blog page, and made comparisons to other small beverage companies and what kind of valuation the market was assigning to them. 

We fully expected that once the hype from the investor group ran its course, that the stock would return to a more normal valuation, which we estimated to be around $1.50 to $1.60 a share.

Needless to say, not everyone agreed with our assessment, but ultimately the stock did settle back to within the valuation we assigned to the shares.

What we have discovered over many years of investing in the Micro-cap space is that it is a big mistake to ignore valuation

Generally speaking, investors who ignore valuation wind up either over-paying for shares when they enter a position, or fail to sell when shares reach a valuation level that is unsustainable. Either scenario can cost investors dearly.


Valuation has once again become a concern for us as the past three quarters it appears that revenues have plateaued at a level between $6.5 and $7 million.

Revenues for the first quarter of 2017 came in at $6.0 million, well below our expectations of between $7 and $8 million.


We love Celsius products, and have been using them every single day since we first invested in this company back in August of 2008.

But there is a big difference between a company's products, the company itself and an investment in the company.

We have been watching the Rocky Mountain High Brands (RMHB) stock message boards, since it was announced that former Celsius CEO Gerrry David and current Celsius Board member Kevin Harrington have joined the RMHB Board of Directors.

It is simply amazing to us that so many investors in RMHB focus merely on the products without giving any meaningful weigh to fundamental metrics such as revenues (which are declining) the balance sheet (which is a mess) or the dramatic over-valuation of the company's shares.

Furthermore, with almost 800 million shares outstanding and 950 million authorized, the capital structure makes it almost impossible to achieve success as an investor in RMHB.

A few weeks ago, RMHB was valued at around $86 million. Their revenue run rate is currently less than $1 million a year. Is RMHB worth over 80x revenues. We would answer that with an emphatic "Noooo".

But to listen to the folks posting on I-HUB and Investors Hangout, RMHB is at least a 0.30-0.50 cent stock, or 3-5x its current 80x revenue valuation !!!!!

The ability of investors to overlook what is really important for success in investing gets overcome by unrealistic fantasies of achieving great wealth by finding the next Apple or Amazon.

We like the fact that Gerry David and Kevin Harrington have become involved with RMHB, but quite frankly we would not touch the stock at this point. 

While it may be a bitter pill for investors to swallow, what is needed to fix the capital structure of RMHB is a reverse split. 

Anyway, we digress....back to Celsius Holdings, Inc. 

With 2016 sales of $22.8 million, and worse yet flat sequential revenue comparison for the last three consecutive quarters, we find it difficult to justify a 12x multiple on revenues (on a fully-diluted 58.8 million shares) when the peer group in which CELH competes is valued at between 3.5-4x revenues.

CSI Market Data shows a price-to-sales ratio for Celsius Holdings, Inc. of 17.06

We could understand a premium valuation if revenues were growing 25-30% quarter-over-quarter, but they have not.

We should note that valuation is still a subjective measurement. When we wrote about CELH valuation on our blog back on May 4, 2017 we referenced two different reports.

Morningstar Research, which uses a quantitative approach, last estimated CELH fair value to be $3.49 on May 3, 2017.



Capital Cube, on the other hand, estimated CELH to have a fair value of around $1.56 on that same date. Today Capital Cube estimates CELH fair value to be around $2.32 





 Unfortunately, there is not a more recent Morningstar report to reference, since the OTC Markets website no longer posts Morningstar's report for CELH on their website.



In addition to valuation, it is important to understand two other important factors; first CELH shares are already up 91% so far in 2017 and secondly the restricted shares from the 2015 capital raise are now freely-trading, which means that those shares may be sold at anytime in the NASDAQ exchange.

There is an old adage on Wall Street that goes "a bull makes money, a bear makes money, but a pig gets slaughtered"



We rode shares of CELH all the way from 0.22 to $4.65 since 2013, and whether, or not, the shares go higher from here really does not matter. A twenty-bagger is good enough for us.

Whether you do not subscribe to our view on valuation, or have some other reason for sticking with shares of CELH we wish both the company and its shareholders continued success in 2017 and beyond.

As for us, we are on to looking for new ideas in which to invest. Good luck to all.

This is not a recommendation, or a solicitation to purchase or sell shares of Celsius Holdings, Inc. ($CELH) or Rocky Mountain High Brands ($RMHB).Be sure to read our complete disclaimer at www.altitradepartners.com. The opinions expressed herein are those of Altitrade Partners, and its principals, and should not be used as the basis for any decision to buy or sell securities. All investing involves risk. Do not rely solely on the opinions of others in making investment decisions. Please perform your own due diligence and invest responsibly. Altitrade Partners makes this blog available for informational purposes only. You should not follow our trading & investment strategies, as they are subject to change without notice.


Monday, May 15, 2017

May 15th - Research Notes & Trade Blog



Kevin Harrington Follows Gerry David to The Board of Directors of Rocky Mountain High Brands, Inc. (RMHB)



As if there were not enough strange things happening recently in the trading volume of Celsius Holdings, Inc. (CELH), we now are seeing a continuing number of changes taking place which involve former and current CELH officers and directors.

The most recent change was last Friday's announcement that CELH Board member Kevin Harrington has now joined the Board of Directors of Rocky Mountain Brands, Inc. (RMHB).

Harrington follows Gerry David as the second person from the ranks of CELH to join RMHB's Board of Directors. 




Gerry David was also named as a "special consultant" to the Chairman of Rocky Mountain High Brands, Inc. back in late April.

There has been no announcement by Celsius Holdings, Inc. with regard to any change in Harrington's status on the CELH Board, so we assume that he will continue in his current role with Celsius for the foreseeable future. 

This all comes on the heels of the recent announcement, a few weeks ago, that Tim Leissner of Goldman Sachs fame decided to resign from the CELH Board of Directors for what amounted to "personal reasons".

At least that was what Interim CEO and CFO John Fieldly told investors on last Thursday's conference call which followed the release of Celsius's Q1 financial results.

We don't know what all of this means, but it certainly adds to the intrigue which has surfaced regarding Gerry David's departure as Chief Executive Officer of CELH effective March 1, 2017.

We find it interesting that Rocky Mountain High Brands, Inc. has managed to attract two people affiliated with Celsius Holdings, Inc. within just the past few months.

You can be sure that we will be watching developments over at RMHB, now that a couple of the key people who were responsible for shaping the success of Celsius Holdings, Inc. have become Board members of this upstart beverage brand. 

This is not a recommendation, or a solicitation to purchase or sell shares of Celsius Holdings, Inc. ($CELH).  Be sure to read our complete disclaimer at www.altitradepartners.com. The opinions expressed herein are those of Altitrade Partners, and its principals, and should not be used as the basis for any decision to buy or sell securities. All investing involves risk. Do not rely solely on the opinions of others in making investment decisions. Please perform your own due diligence and invest responsibly. Altitrade Partners makes this blog available for informational purposes only. You should not follow our trading & investment strategies, as they are subject to change without notice.

Thursday, May 11, 2017

May 11th - Research Notes & Trade Blog



Celsius Holdings, Inc. (CELH): Is The Growth Story Over or Just On Pause?

Today, after the close of trading, Celsius Holdings, Inc. reported financial results for the first quarter of 2017. 

The headline number looked good --- "up 63%" from the same period in 2016, but that was an easy number to beat anyway.

No. What we were looking for was a minimum of $7.0 million in order to re-establish the uptrend of sequential revenue increases. 

We thought that there may have even been the outside possibility of reaching the $8.0 million mark, which would have been a 29% sequential increase from Q4 of 2016. 

What we got was a disappointing $6.0 million for Q1, below even the lackluster Q4 2016 number of $6.2 million.




This means that the last four quarters have produced a $6.2 million quarter, followed by a $6.7 million quarter, followed by $6.3 million quarter, and now a $6.0 million quarter.

The bottom line is that growth has slowed considerably, and that is cause for concern from a valuation standpoint.

Looking at sequential revenue growth of 8% in Q3 2016, (-7.3%) in Q4 2016 and (-4.7%) in Q1 2017 we do not view that as being able to adequately justify CELH's high growth multiple.

When we look back, this represents a far cry from the days when Celsius was seeing revenues growing at 26% to 35% sequentially as they did in Q3 and Q4 of 2014.

Furthermore, the company is operating without a full-time CEO and it appears that International growth from Mainland China is at least a 2018 story, if at all.



Perhaps the company is going though another period of strategic challenges, as they have in the past, and perhaps they will come through it as they have done previously? 

The question for us is whether or not investors are willing to bet on another successful resolution to these problems without former CEO Gerry David at the helm, and how long will it take to get back on track? 

What we will tell you is that we have become very disheartened and uncomfortable over the past two quarters. The last two investor conference calls have left us feeling that management is back-tracking on previously enthusiastic rhetoric surrounding China and the expansion into the International markets.

Add to that the CEO's departure, the resignation of a board member who we viewed as a "dealmaker", along with a couple of IR/PR faux-pas's, and we just aren't feeling the confidence in CELH that we once did.

All of this aside, the single biggest concern that we have is valuation. At 10x revenues (on a fully-diluted basis), CELH is selling at an extremely rich valuation relative to the peer-group in which it competes.

During the time that revenue growth was escalating, we were willing to live with that kind of multiple. Now that growth, on a sequential basis, has stalled and turned negative, we are no longer willing to give CELH a hall pass.

It will be interesting to see what kind of reaction the market gives to today's news when trading resumes tomorrow, but we wouldn't expect investors to be overly excited about a company that is exhibiting signs of slowing growth, a rich valuation and a lack of a seasoned CEO at the helm.




We're not sure if the Celsius Holdings, Inc. growth story is over, or is simply on pause, but either way investors are going to experience a lot of angst until they are once again able see a clear path to the future, along with new proven executive leadership that will produce more consistent results.

This is not a recommendation, or a solicitation to purchase or sell shares of Celsius Holdings, Inc. ($CELH).  Be sure to read our complete disclaimer at www.altitradepartners.com. The opinions expressed herein are those of Altitrade Partners, and its principals, and should not be used as the basis for any decision to buy or sell securities. All investing involves risk. Do not rely solely on the opinions of others in making investment decisions. Please perform your own due diligence and invest responsibly. Altitrade Partners makes this blog available for informational purposes only. You should not follow our trading & investment strategies, as they are subject to change without notice.


Monday, May 8, 2017

May 8th - Research Notes & Trade Blog



Will Celsius Holdings, Inc. Deliver When They Release Q1 Financial Results Later This Week?

It's crunch time for Celsius Holdings, Inc. (CELH) as the company prepares to release first quarter 2017 financial results after the market close on Thursday.



As we have previously opined, we want to see a resumption of the growth in CELH revenues on a sequential basis to continue to validate what has become a very attractive OTC investment story.

In order to achieve this, we believe that the company needs to post Q1 revenues of between $7.0 - $8.0 million, with the lower end of that range being the absolute minimum.

After reporting FY2016 revenues of $22.8 million, up some 32% over 2015's prior results, Celsius is going to need to show a strong pace of revenue growth during FY2017 in order to justify its premium valuation to others in its respective peer group. 

We'll be looking forward to the release of Q1 results as well as management's comments on the investor conference call, scheduled for 4:30 PM ET that same day.

This is not a recommendation, or a solicitation to purchase or sell shares of Celsius Holdings, Inc. ($CELH).  Be sure to read our complete disclaimer at www.altitradepartners.com. The opinions expressed herein are those of Altitrade Partners, and its principals, and should not be used as the basis for any decision to buy or sell securities. All investing involves risk. Do not rely solely on the opinions of others in making investment decisions. Please perform your own due diligence and invest responsibly. Altitrade Partners makes this blog available for informational purposes only. You should not follow our trading & investment strategies, as they are subject to change without notice.

Thursday, May 4, 2017

May 4th - Research Notes & Trade Blog



 Should Investors in Celsius Holdings, Inc. Be Worried About Valuation?

Celsius Holdings, Inc. is getting ready to report first quarter financial results a week from today.

While the $3.7 million in revenues posted in Q1 of 2016 should be easy to beat on a year-over-year basis, our focus remains on sequential revenue growth which over the past three quarters is beginning to show signs of slowing, or at least plateauing at around the $6.2 - $6.7 million number.


We have been disappointed in the fact that despite the addition of a number key positions to the Celsius sales & marketing staff, we have not seen a more rapid acceleration in revenue growth.

In an earlier blog post, we referenced the importance of CELH showing a strong revenue number for Q1 of 2017. Anything less than $7 million in revenues could raise questions about whether the growth story for CELH is in jeopardy.

The market has rewarded Celsius Holdings, Inc. with a rich valuation based on that strong growth story, but investors need to look at a number of metrics which could become a problem in terms of the company's valuation without the resumption a very strong growth trajectory.

Here are a number of charts, courtesy of Capital Cube, which lay out some of the metrics for CELH relative to its peer group.








All three of these charts should raise concerns regarding the valuation the market is assigning to CELH relative to its peer group.

A scattergram prepared by the folks over at Capital Cube places CELH at the far end of the spectrum when it comes to fundamentals versus relative valuation. 


In their valuation summary, Capital Cube indicates that they place a "fair value" of $1.56 on shares CELH given all of the empirical data that they have at their disposal.


Morningstar Research, which uses a quantitative 
approach, also ranks shares of Celsius Holdings, Inc. as being "overvalued".


We offer all of this for investors to consider in light of the upcoming financial results due out next week.

If Celsius Holdings, Inc. can put up some stellar numbers for Q1 and management provides future guidance which would indicate to investors that the growth story remains strongly intact, then the premium valuation to the peer group in which CELH competes could continue.

If, one the other hand, Q1 numbers fail to impress, we see near-term risk in the shares.

This is not a recommendation, or a solicitation to purchase or sell shares of Celsius Holdings, Inc. ($CELH).  Be sure to read our complete disclaimer at www.altitradepartners.com. The opinions expressed herein are those of Altitrade Partners, and its principals, and should not be used as the basis for any decision to buy or sell securities. All investing involves risk. Do not rely solely on the opinions of others in making investment decisions. Please perform your own due diligence and invest responsibly. Altitrade Partners makes this blog available for informational purposes only. You should not follow our trading & investment strategies, as they are subject to change without notice.

Wednesday, May 3, 2017

May 3rd - Research Notes & Trade Blog



Three Charts Which Tell Us That a Major Market Decline is Coming





This is not a recommendation, or a solicitation to purchase or sell shares of any securities. Be sure to read our complete disclaimer at www.altitradepartners.com. The opinions expressed herein are those of Altitrade Partners, and its principals, and should not be used as the basis for any decision to buy or sell securities. All investing involves risk. Do not rely solely on the opinions of others in making investment decisions. Please perform your own due diligence and invest responsibly. Altitrade Partners makes this blog available for informational purposes only. You should not follow our trading & investment strategies, as they are subject to change without notice.

Monday, May 1, 2017

May 1st - Research Notes & Trade Blog


Why Celsius Holdings, Inc.'s Next Quarterly Report Is Critical To Sustaining It's Rich Valuation

Celsius Holding's Inc. is scheduled to report first quarter financial results next week. While there is no official word yet from the company, our expectation is that the report may be released after the close of the market on Thursday, May 11, 2017.

In our view, the Q1 report is critical to the company being able to sustain its rather rich valuation among the peer group of beverage company stocks that Celsius falls into.

A perfunctory look at the names in the group shows that the median valuation from a price-to-sales metric is 2.95x and that the median price-to-book ratio stands at 8.47x.


The complete link to the data above is here: 

http://csimarket.com/stocks/competitionNO8.php?code=CELH

Currently, Celsius Holdings, Inc. (CELH) is trading at approximately 10x its annual revenues (on a fully-diluted basis) and at a price-to-book ratio of almost 28x. 

The company has been able to hang on to its rather rich valuation as a result of a very strong Compound Annual Growth Rate (CAGR).

In order to continue to justify its current stock price, the company will need to show investors that its strong growth rate remains intact, and may even be showing signs of improving.

Without a strong showing in the first quarter of 2017, investors may begin to worry about the company's ability to continue its history of stellar revenue growth, along with the premium valuation it has managed to earn.

We would like to see a minimum Q1 revenue number of $7 million. If the company can manage to post a revenue number closer to $8 million, even better. 

For now, it appears that investors are patiently waiting to see what first quarter results will show in terms of revenue growth both year-over-year and sequentially.





There is no doubt that next week will be an important one for Celsius investors.

This is not a recommendation, or a solicitation to purchase or sell shares of Celsius Holdings, Inc. ($CELH).  Be sure to read our complete disclaimer at www.altitradepartners.com. The opinions expressed herein are those of Altitrade Partners, and its principals, and should not be used as the basis for any decision to buy or sell securities. All investing involves risk. Do not rely solely on the opinions of others in making investment decisions. Please perform your own due diligence and invest responsibly. Altitrade Partners makes this blog available for informational purposes only. You should not follow our trading & investment strategies, as they are subject to change without notice.