Finding a stock that can increase in value more than 50% in a single year doesn’t come easy. What’s more, just because a stock has the potential to grow quickly doesn’t mean it will. Any number of factors could influence the future stock price for a company: not just the company’s financial results, but ongoing market sentiment, not to mention the outlook for the economy as a whole.

But one candidate has already proven it can consistently produce market-beating results, and it looks well positioned to do so again. Celsius Holdings (NASDAQ: CELH) has seen its stock beaten down over the last few months, as its financial outlook has scared off investors in the growth stock. But the current dip could be a great opportunity for investors willing to take on the risk.

The average analyst on Wall Street currently has a price target of $49.40 per share. That’s nearly 60% above the current stock price. Here’s why analysts are so energized around Celsius.

What’s causing the big stock slump?

Celsius has seen incredible growth over the last few years, establishing itself as the third-biggest energy drink company by market share after Monster Beverage and Red Bull. It climbed from 3.6% market share in the United States at the start of 2022 to 11.5% last quarter.

But there are some signs that the growth is at least taking a pause this year. Management noted a drop in market share in the early part of the third quarter. Earlier this year, they noted a drag on revenue growth due to its distribution partner, PepsiCo, adjusting its inventory levels.

CEO John Fieldly said Pepsi ordered $100 million to $120 million less this quarter than it did in the third quarter last year. That’s a huge bite out of Celsius’ $400 million in quarterly sales, which means the company could be in line for its first year-over-year sales decline since 2018.

Slowing sales are a concern for any company, but when it’s such a sudden shift, it can throw a stock’s momentum into reverse very quickly. That’s exactly what happened to Celsius. As concerns over the Pepsi inventory channel started to appear, investors started selling off shares. That resulted in shares falling from a high of around $98 in May to just $31 today.

But the sell-off may be overblown, as Celsius is still showing considerable strength in the end market and has a lot of potential growth ahead of it.

Why analysts remain bullish

It’s important to remember Celsius’ distribution deal with Pepsi is still fresh. It started in 2022, with 2023 being the first full year. That added a big buyer for Celsius, and it helped the company expand distribution much more quickly than it could on its own. Pepsi gives Celsius access to the valuable foodservice channel, which contributed about 12% of sales in North America.

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Celsius has also been able to introduce new flavors and get them on store shelves quickly. It expanded from 12.5 products per store in 2022 to 20 per store today. The rapid expansion of its product line likely led to a strong growth in inventory for Pepsi. But with lower growth in Celsius’ shelf space, Pepsi is better able to right-size inventory needs.

Investors should expect the drop in sales to Pepsi to be a one-time event this year. If you look at other sales channels, Celsius is doing well. Sales on Amazon, for example, grew 41% year over year last quarter.

Management also plans to step up marketing and promotions in the back half of the year to reinvigorate sales. It saw its gross margin expand to 51.6% in the first half of the year, up five percentage points from last year. That’s due to supply chain efficiency as it scales. Management intends to reinvest those gross profits to scale further, which should boost the top line (although investors will see weaker gross margin).

Lastly, there’s a big international opportunity. Just 5% of Celsius’ sales come from outside the United States. By comparison, 39% of Monster’s sales come from international markets. Celsius’ international expansion is just getting started with a handful of countries this year, but it could eventually become a significant part of its business, especially with the help of Pepsi’s distribution.

Despite the drop in share price over the last few months, Celsius’ stock still isn’t cheap by any valuation standard. It currently trades for a forward earnings multiple of about 31. But the current challenges facing the business appear to be temporary, and it should resume its strong growth of the last few years as Pepsi adjusts its inventory.

The return to form could send the share price rocketing higher. And while it might not return to the levels it was trading at just a few months ago, it could produce well above average returns. For risk-tolerant growth stock investors, it may be worth adding shares at the current price.

Should you invest $1,000 in Celsius right now?

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Adam Levy has positions in Amazon. The Motley Fool has positions in and recommends Amazon, Celsius, and Monster Beverage. The Motley Fool has a disclosure policy.

1 Incredible Growth Stock to Buy Before It Climbs 58% Over the Next 12 Months, According to Wall Street Analysts was originally published by The Motley Fool