11:39 AM EDT, 09/05/2024 (MT Newswires) -- Celsius Holdings' ( CELH ) year-over-year sales are likely to decrease by the end of Q3 due to inventory timing issues with PepsiCo ( PEP ) , BofA Securities said in a note Thursday.

"Celsius Holdings ( CELH ) management announced [$100 million to $120 million] of expected inventory drag impacting [Q3], again caused by Pepsi's more efficient inventory management amid a decelerating category," BofA said, adding that if demand degradation were to continue through Q4, another significant sales reduction due to Pepsi's inventory issues is likely in the next quarter.

To counteract poor market share trends this year, Celsius plans to extend price promotions into the second half of 2024, particularly around live sports and music events. However, the brokerage said it remains concerned about "unflattering velocity performance" that could affect shelf space and contribute to further inventory issues in H1 2025.

BofA has revised the company's Q3 sales to $289 million, down 25% year-over-year, with Q4 sales cut by 12% to $350 million, leading to revised full-year 2024 sales of $1.4 billion and 2025 sales of $1.55 billion, while adjusted earnings before interest, taxes, depreciation and amortization estimates were also lowered, the note said.

BofA maintained an underperform rating on Celsius shares and lowered its price objective to $26 from $32.

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