We recently compiled a list of the 10 Stocks with Biggest Upside Potential According to Hedge Funds. In this article, we are going to take a look at where Celsius Holdings, Inc. (NASDAQ:CELH) stands against the other stocks with biggest upside potential.

The US equities saw a strong move after the September jobs report exceeded the economists’ estimates. As per the report, the US economy added 254,000 jobs last month, exceeding the economists’ estimates of 150,000 jobs. As a result of strong job gains, the unemployment rate was pushed lower to 4.1% from 4.2%. The strong jobs report puts rest to the rumors that the US Fed might aggressively lower the rates in a bid to keep the labor market afloat. The apex bank lowered its key benchmark rate last month for the first time in over 4 years by 50 basis points. This led to the current range of 4.75% – 5% from the 23-year high of 5.25% – 5.5%.

Several renowned economists believe that the US Fed will decrease the pace of rate cuts. They expect a 25-basis points reduction instead of another half point at its next meeting on 6 -7 November. The September jobs report hints at the underlying health of the labor market, which is healthier than initially expected. This means that the private job creation remains robust.

U.S. Equities September 2024- Commentary

As per S&P Global, the S&P 500 saw an increase of ~2.02% in September, resulting in a YTD return of ~20.81%. The September month was dominated by the news about inflation remaining under control, and the US Fed delivering a 0.50% rate decrease, with the expectations of two 0.25% decreases expected later in the year. Additionally, Q2 2024 earnings were able to set a record, with more earnings records expected for Q3 2024 and Q4 2024. Notably, even China also contributed at the end of the month, ensuring low-cost U.S. supplies. China needs to continue to do so to achieve its goal of supporting real estate and encouraging consumer spending.

Market experts believe that while the September month saw decent momentum in the US equities, October kicked off on a strong note. The release of the strong jobs report was enough to erase the losses on the nervousness over Middle East tensions and port strikes. The Chief Investment Officer at Independent Advisor Alliance believes that the current economic environment is an excellent time to own equities. This optimism stems from the fact that the economy has been expanding, the job market remains solid (if not strong) and the US Fed has not only stopped raising rates but is focused on cutting them.

After Strong Jobs Report, What Lies Ahead?

Market experts opine that the US Federal Reserve decided to go for a soft landing by increasing the interest rates to slow inflation without negatively impacting the labor market to the point of a recession. Charles Schwab believes that investors should not expect a uniform economic recovery. The strength in services hiring continues to offset the weakness in manufacturing. The company highlighted that healthcare and government are the areas that have had strong hiring trends over the past few months. Manufacturing has been witnessing a recession, as hinted by the continued contraction of the ISM manufacturing index. The company believes that rate-sensitive areas, like utilities, financials, and real estate investment trusts (REITs), are expected to deliver strong performance moving forward.

Morgan Stanley Wealth Management believes that the US Fed doesn’t have to cut rates aggressively in the upcoming meetings. The investment firm expects that investors should look for value across the whole market, and emphasize quality companies as the market continues to broaden. While the economy has not strengthened for the small-caps, the firm expects that mid-caps provide a good investment opportunity as a soft landing becomes more visible.

Our methodology

To list 10 Stocks with Biggest Upside Potential According to Hedge Funds, we did extensive research and sifted through online rankings. After compiling a list of 25-30 stocks, we narrowed the list to the ones having the biggest upside potential, as of October 4. Finally, the selected stocks have been ranked in the ascending order of their hedge fund sentiment, as of Q2 2024.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).

Celsius Holdings, Inc. (NASDAQ:CELH)

Average Upside Potential: 65.29%

Number of Hedge Fund Holders: 27

Celsius Holdings, Inc. (NASDAQ:CELH) is engaged in developing, processing, marketing, distributing, and selling functional energy drinks and liquid supplements in the US, Australia, New Zealand, Canada, Europe, Middle Eastern, Asia-Pacific, and internationally.

Wall Street analysts believe that Celsius Holdings, Inc. (NASDAQ:CELH) should continue to maintain its position as the category growth leader and expand its shelf presence. Its strong partnership with PepsiCo and a strategy to execute growth-driving programs should continue to act as growth enablers, which might get reflected in the stock price.

Celsius Holdings, Inc. (NASDAQ:CELH) focuses on investing in growth and monitoring raw material costs. The company is targeting gross margins in the high 40s – 50s range in H2 2024. It has also announced new flavours and market expansions, which include the UK, Ireland, Australia, New Zealand, and France. Wall Street expects that Celsius Holdings, Inc. (NASDAQ:CELH) should be able to stabilize and grow its market share via strategic investments and promotions.

In Q2 2024, the company’s revenue went up by 23% to $402.0 million as against $325.9 million for the prior-year period. This increase stemmed from North American business and its success in sustaining consumer demand growth. Its gross profit as a percentage of revenue came in at 52.0% for the three months ended June 30, 2024, reflecting a rise from 48.8% for the prior-year period. This was due to freight optimization and lower materials costs.

BNP Paribas assumed coverage on the shares of Celsius Holdings, Inc. (NASDAQ:CELH) on 24^th June. They gave an “Outperform” rating and a $87.00 price target. As per Insider Monkey’s Q2 2024 data, 27 hedge funds reported owning stakes in the company.

Fred Alger Management, an investment management company, released its second quarter 2024 investor letter. Here is what the fund said:

“Celsius Holdings, Inc. (NASDAQ:CELH) engages in the development, marketing, sale, and distribution of functional drinks and liquid supplements. It also offers post-workout functional energy drinks and protein bars. During the quarter, shares detracted from performance after the company reported fiscal first quarter revenues below analyst estimates. The revenue shortfall was attributed to ongoing inventory management challenges with PepsiCo, which decelerated year-over-year revenue growth from over 100% to approximately 37%. Despite the near-term growth slowdown, we believe Celsius remains well positioned to potentially capture market share within the large energy and soft drink industry over the long-term.”

Overall CELH ranks 7th on our list of the top stocks with biggest upside potential according to hedge funds. While we acknowledge the potential of CELH as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than CELH but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article is originally published at Insider Monkey.