What's going on with Celsius stock? | The good, the bad and the $1.8 billion question

Celsius stock has been on a rollercoaster. It’s down 65% from its peak, but also up nearly 60% since February. What’s going on? In this episode, we break down the good, the bad, and the $1.8 billion question: Celsius’ acquisition of Alani Nu.  

Is this a strategic move to expand its market share, or a desperate attempt to keep growth alive? We’ll talk about why investors are so divided on Celsius, the risks of competing with Monster and Red Bull, and whether its deal with Pepsi is a blessing or a ticking time bomb.

Some think Celsius is the next big thing in energy drinks. Others say it’s an overhyped stock with a shaky future. Where does the truth lie? Let’s dive in.

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Transcript

 Celsius | What’s Happening with the Stock?

Welcome back to The Dutch Investors podcast! Today, I want to talk about Celsius Holdings, one of the most unpredictable stocks in the energy drink industry, perhaps even in the current stock market. The stock is down 65% from its peak, but up almost 60% since February 12th. What is going on? What makes it a company that investors either love or hate? And most importantly, what does the recent $1.8 billion acquisition of Alani Nu mean for the company’s future? 

We’ll break it all down in this episode.

If you’ve followed Celsius or read our fundamental analysis on the company, you’ve seen just how extreme its stock movements can be. In 2024, it skyrocketed to record highs, only to drop 75% from its peak. Then, recently, after announcing the Alani Nu acquisition, it jumped by 37%. So, why does a company, like Celsius, behave the way it does?

First, let’s briefly talk about what Celsius is and what makes them unique, compared to, say Monster or Red Bull. We need to understand the fundamentals and understand what they’re trying to achieve.

Celsius is an energy drink targeting a young adult audience that aspires to be active and healthy. So far, it has been successful, with a 100% compound annual growth rate (CAGR) over the past five years! However, growth has slowed in recent quarters.

Moat
As a new energy drink brand, two things are crucial:

1. Getting on store shelves (distribution)
2. Selling in stores (customer satisfaction, sales, and marketing)

Lastly, counter positioning. Celsius is clearly positioning itself as a counterpoint to Red Bull and Monster. While Red Bull and Monster embrace an extreme and unhealthy image, Celsius goes for fresh, fit, and healthy. I think this is a smart move by Celsius—you don't beat the established players by doing the same thing better. Look at soft drinks: cola dominates. Red Bull became successful by doing the exact opposite of Coca-Cola, but compared to the established players, Celsius has a weak moat.

In terms of distribution in the U.S., Celsius is in a strong position as long as their deal with Pepsi remains in place.

This comes down to a few key reasons:

• Reason number 1. High Expectations vs. Reality. Investors love growth stories, but when numbers miss expectations, panic selling sets in.
• Reason 2, Inventory Issues. Pepsi, the main distributor for Celsius, has been reducing its inventory orders, which raised concerns for Celsius about slowing sales, something you don’t want if lots of growth are already priced in. Over 50% of Celsius’ revenue comes from Pepsi’s distribution network. If Pepsi withdraws, Celsius will face a significant problem.
• Reason number 3: A rich valuation. The stock has been priced for perfection, so any sign of trouble leads to sharp drops. The company has a $8 billion dollar market cap, with close to $1.4 billion in revenue. The market cap used to be over 22 billion dollars. For comparison, Monster Beverage, together with Red Bull their largest competitors, have market caps closer to $50 billion but with 6 times more revenue and 12 times as much cash flow. So investors are expecting Celsius to grow significant to compensate for the rich valuation.
• Last but not least, reason 4, Competition – Red Bull and Monster ($MNST) dominate the market, and have been, for decades. Celsius and newer brands like Alani Nu are gaining ground, but it's been a lot more challenging than expected.

These ups and downs stem from investors trying to figure out if Celsius is a long-term winner or just another high-growth company that fades over time.

Celsius is marketed as a healthier alternative, appealing to young, active consumers. There are several reasons investors like Celsius:

• Revenue growth was over 100% year-over-year at its peak.
• Partnership with PepsiCo gives it strong distribution power.
• It caters to a fast-growing health-conscious market.
• International expansion offers untapped potential.

But other investors are more skeptical:

• Its competitive advantage is questionable
• U.S. sales growth is slowing—where will future growth come from?
• The stock has been very expensive compared to earnings.
• Reliance on Pepsi—what happens if Pepsi shifts its focus elsewhere?

But opinions on the company are divided. It feels like you either hate or love the company. Similar to Tesla or Palantir. You either see the vision and have the risk tolerance and faith to hold on, or you look at the many red flags and do not like the risk-reward ratio. Some investors see it as the next Monster, while others think it’s overhyped and overpriced with an uncertain future.

Now, let’s talk about their most recent big move—Celsius spending $1.8 billion to acquire Alani Nu. On paper, this seems like a power move to dominate the women’s energy drink market.

There are a few reasons why it could be a good move:

• Increases Market Share – The deal boosts Celsius’ North American market share beyond 10%.
• Expands International Presence – Alani Nu has already built global distribution channels.
• Diversifies Products – Celsius can now branch into protein bars and other fitness-related products.
• Prevents Market Share Loss – By acquiring a key competitor, Celsius blocks potential threats.

Now, let’s talk about what could go wrong.

• Can Celsius Handle Acquisitions? – The company has never made a major acquisition before—this could be a messy transition.
• Expensive Deal – They paid 3x revenue and 12x adjusted EBITDA, which is on the high side. We dislike to word adjusted and tend to avoid most companies that, without a really good reason, use the word adjusted. 
• Another risk is increasing Debt and Share Dilution – The deal includes $900 million in new debt and 22.5 million new shares, reducing existing investors’ ownership. This is roughly 10% dilution. Not many investors look at growing shares outstanding, but Celsius stock has doubled since 2015. So if you held, 5% of the company back in 2015, that’s now 2.5% of the company. It’s a silent killer of returns.
• Lastly, was the acquisition necessary?. You can look at the acquisition in two ways. The first one is, acquiring a growing competitor is good for Celsius, meaning one less competitor and the potential for new growth opportunities. However, one could also look at this from a different angle. The acquisition can also signal weakness. Celsius is unable to do this themselves, expand internationally and use their brand and marketing to grow organically. If Celsius needed this to maintain growth, does it signal underlying weakness? I don’t know, but maybe. One could also wonder if this acquisition really has synergies… I don’t know if it does to be honest.

We’re not sure what to think. The acquisition needs some time to play out, but it appears most investors have already drawn a conclusion with the 37% jump. So even if everything works out, a lot is already priced in again.

Let’s be honest—Celsius was in a tough spot. After its stock plummeted, revenue slowed, and Pepsi reduced orders, management had limited options:

• Buy back shares? Not realistic for a company that needs to keep growing to maintain or grow market share and its brand.
• They could start paying dividends, but that would be a sign they’ve run out of growth ideas. So, that’s off the table for now.
• They could improve the Pepsi partnership, but that’s easier said than done, since Pepsi holds almost of the power.
• Their last option, besides throwing all their money in marketing, was to acquire? This was their least bad option, if you can say it like that.

Considering the situation, we think this was a reasonable move, but it comes with real risks. We do believe in many people are to overly optimistic and haven’t really considered what can go wrong. If they fail to integrate Alani Nu effectively, the market won’t be forgiving.

Or as Benjamin Graham once said, “In the short run, the market is a voting machine but in the long run, it is a weighing machine.”

So here is our final verdict on what this all means. And I think the best way to go at this, is to take both sides, the bullish and bearish side, into consideration. So let’s start with the Bullish Case, with is that, if

• Celsius remains one of the fastest-growing energy brands, and the Alani Nu deal strengthens their position in the market, this could allow Celsius to try and focus on global expansion. This would offer a very long runway for growth, since close to 95% of its current revenue still comes from the US. Also, the Pepsi distribution reach gives it an edge over smaller competitors. It also really helps that they’re counter-positioning versus Red Bull and Monster, and consumers are becoming more and more health consience. A nice tailwind.

If we take the opposing side, the Bearish Case, investors have a different view on Celsius.

• The stock is still richly valued, even after its 65% drop. If Celsius cannot synergize or integrate with Alani Nu, this can be a huge problem. If Celsius’ acquisition of Alani Nu fails, it could lead to significant financial and accounting issues. When a company buys another for more than its tangible assets are worth, the extra amount is recorded as goodwill on the balance sheet. If the acquisition doesn’t perform as expected, Celsius may have to write down (reduce) this goodwill, which would show up as an impairment charge, hurting earnings. Additionally, any intangible assets acquired (like brand value or customer relationships) must be amortized (gradually expensed over time), while physical assets (like equipment) are depreciated, both of which lower profits. All the current Celsius shareholders and its valuation.

Another argument for the bearish side of the Celsius thesis is the U.S. growth, where 95% of revenue comes from, is slowing. Also, the new debt and share dilution can really weigh on returns. And think about the duopoly between Red Bull and Monster, which own roughly 40% and 30% of the energy drinks market respectively. If they see the ‘healthier’ drinks are stealing market share from them, do you think they’ll sit there and do nothing? Probably not. They will either invest a lot into new products, increase marketing, make current drinks healthier, or, perhaps, even acquire a healthier alternative energy drink company like Celsius. Who knows right?

So, here are our final Thoughts? Celsius is not a clear-cut winner, as many investors make it out to be. If they successfully integrate Alani Nu and continue expanding, it could become a reasonably good investment, but it won’t 10x, most likely since they’re already close to 10 billion in market value. If they were to 10x, they would be twice the size of Monster Beverage. I don’t know how realistic that is. But maybe, if they execute very well.

But if growth slows, or they mishandle this deal, the stock could struggle and drop even more.

For now, we’re staying on the sidelines and seeing how this all plays out.

Want a deeper look at Celsius and truly understand all the ins-and-outs of this company and industry? Check out our premium analysis on The Dutch Investors.com.

Luckily, our analyst Luuk is also working on an industry report on the energy drinks market for our members.

That’s it for today’s episode!

Until next time, stay curious, keep learning and happy investing.