Global well-known research institution Nielsen's data reveals that in the slowing growth of the energy drink market, energy drink manufacturer Celsius (CELH.US) has still achieved strong growth - the company's second-quarter sales increased by 23% year-on-year, and profits increased by 65% year-on-year. However, since the beginning of this year, Celsius's stock price has cumulatively dropped by almost 42%, while its competitor Monster Beverage (MNST.US) has only decreased by about 9%.

What are the reasons behind the poor performance of Celsius stock? Why are Wall Street analysts becoming more cautious about the stock?

Morgan Stanley and Piper Sandler are two companies that recently rated Celsius. The former downgraded its performance expectations for Celsius in the third quarter, while the latter lowered Celsius's target price by 6% to $47.

Analysts Eric Serotta from Morgan Stanley and Michael Lavery from Piper Sandler both believe that promotions and discounts related to reducing inventory of PepsiCo (PEP.US) and the slowing energy drink market sales are unfavorable factors for Celsius in the future. Michael Lavery added that under pressure from consumers and the macro environment, the growth of the energy drink category 'may remain soft for several quarters, and Celsius's market share continues to stagnate in the intensified competition environment,' especially when global energy drink giant Red Bull is currently competing with Celsius through its sugar-free version.

To gain more market share, Celsius must strive to attract loyal customers of Monster Beverage or Red Bull, and introduce new consumers to the category in order to achieve its revenue growth expectations of 30%-34% by 2025 and 2026. However, given the overall slowdown in the energy drink category sales, this is a very high target. In addition, it may be more challenging to attract new customers, as financially constrained consumers are unlikely to spend money on new products, which is also the opinion of many on Wall Street.

Although sell-side analysts are lowering the target price for Celsius due to the trend of slowing sales in the energy drink category and increased competition, buyers are evidently more optimistic about the stock, citing the company's healthy balance sheet (able to withstand market storms), strategic partnerships, positioning in the sugar-free product category, and the consistently expanding shelf space/market share in convenience stores and on the Amazon e-commerce platform.

Some analysts pointed out that energy drinks are a "red ocean market," but attracting new customers who do not like traditional energy drinks is a "blue ocean market." Celsius's sugar-free products niche market is the catalyst for its long-term growth. Analysts said: "Celsius has proven to be a high-profit growth stock, with its earnings indicators continuously improving, indicating its competitive advantage." However, analysts also noted that a new market cannot be conquered in a few months but requires several years.

Celsius's performance in the third quarter will help us understand how the company is affected by the consumer environment and the reduction of inventory by Pepsico, and whether it is correct for sellers or buyers to bet on the stock. Wall Street currently expects Celsius's third-quarter earnings per share to decrease by 43% to $0.16, and sales to decrease by 24% to $0.3049 billion. In addition, it is worth noting that the short interest ratio of Celsius's stock is 11.8%, more than twice that of similar companies, indicating that Wall Street is still bearish on the stock.