My analysis of Celsius; Greetings from Venice
In yesterday's e-mail, I shared the 85-slide presentation on energy-drink maker Celsius (CELH) that won third place at the 19th annual Pershing Square Challenge.
It's an intriguing stock idea, and the two Columbia Business School students who wrote the pitch did an excellent job.
So today, let's take a look at the company's historical and current financials and valuation...
Celsius went public 20 years ago, and the stock had an early pop. But for much of its existence, it languished in penny-stock land, trading below $1.50 – until six years ago.
It then soared to nearly $100 two years ago, crashed below $25 in January 2025, and spiked to around $67 last October.
But it has plummeted 57% since then, closing yesterday at $29.01:
Similar to its stock chart, the company's income statement is very unusual...
Celsius had minimal sales – less than $100 million – through 2019, with operating income losses every year.
But then revenues rose 25 times from 2018 through 2023, while operating income exploded to $266 million. This was driven by a number of factors: expanded distribution, a shift to online marketing, and a brand repositioning away from a niche weight-loss drink to a lifestyle product that coincided with a wellness tailwind from the COVID era.
Celsius purchased Alani Nu for $1.8 billion in April 2025, which sent sales up to $3 billion and operating profit to $643 million over the trailing 12 months ("TTM"):
The cash-flow statement has a similar trajectory...
Free cash flow ("FCF") was negative every year through 2018 and began exploding upward, with the exception of a $100 million loss in 2021 due to building inventory (note that data is missing from 2011 to 2013):
Celsius hasn't done anything much with its FCF over the years. But last year, it acquired both Alani Nu and the U.S. and Canada rights for the Rockstar Energy brand.
So net cash piled up on its balance sheet from 2022 to 2024 before turning to a small amount of net debt in 2025 due to the acquisitions:
Lastly, the diluted share count rose steadily during the company's 14 years of negative FCF, as it steadily issued stock to stay afloat.
But even after turning cash-flow positive, the share count has continued to rise – which isn't a good sign:
In summary, Celsius' financials are strong – but weird. Revenues, profits, and cash flows have exploded so rapidly that it smells like a fad.
As for valuation, analysts expect the company to earn $1.63 per share this year (up from $1.34 last year). At yesterday's close price of $29.01, that means the stock is trading at a modest 17.8 times earnings.
And analysts expect earnings to jump to $2.04 per share next year, which would make the forward 2027 price-to-earnings ratio only 14.2 times.
These are low multiples – but only if Celsius achieves its growth targets.
The Columbia Business School students made a strong case that it will, as I outlined in yesterday's e-mail.
So did someone with the handle "Manchu" on my favorite stock-idea website, Value Investors Club. They posted a bull case for the stock last May, when it was at $35.65.
They argued that the Alani Nu acquisition dramatically changed Celsius' competitive position:
I believe this transaction was a gamechanger for Celsius. Alani is the fastest-growing brand in the category and terms look highly accretive to Celsius – potentially a home run if the brand continues to grow and Celsius can execute on cost synergies/margin improvement. Additionally, it takes out a key competitor and may resolve growth challenges...
Alani Nu has been growing rapidly among younger consumers and especially the female demo with its sugar-free brand. It has effectively used Tik Tok/social media/influencers to attract young audiences, with a variety of flavors and "treasure hunt" flavor/[limited-time offer] strategies to drive engagement and repeat purchasing. The acquisition will not only give Celsius the fastest-growing brand in the category, but one resonating with a complementary, attractive demo.
They also believed Celsius has substantial growth opportunity outside of the U.S.:
Celsius is still barely penetrated internationally, with about 5 markets so far. Canada launched in 1Q24 via Pepsi distribution, and Australia, France, Ireland, [New Zealand ("NZ")], and [the] UK later in 2024. The UK is still in its infancy, mostly via [its] limited launch in fitness and gym channels.
Celsius' market share in 1Q25 was 13.5% in Sweden, 6% in Finland, 4.5% in NZ, 4% in Canada, 2.5% in Australia, 1.2% in Ireland, 0.6% in France, and 0.2% in [the] UK. Just today, Celsius launched in the Netherlands. International revenue grew 41% in 1Q25 and 9% on a comparable basis, excluding new markets, up from 8% in 4Q24.
To frame the opportunity, Monster generates close to 40% of sales internationally versus ~7% at Celsius.
Interestingly, however, another Value Investors Club member, "Laksa," posted that Celsius was a good short on October 15, after the stock had popped to $61.86.
They believed Celsius was valued at a premium based on several bullish expectations:
1) Management can replicate its Covid-era track record today, 2) Celsius benefits from increasing health consciousness, 3) Alani Nu brings significant incremental growth, and 4) Celsius's partnership with Pepsi is healthy. I believe these expectations will disappoint. I estimate the short can return 27% to 45% from current prices from a rerating downward.
They argued that competition is rising rapidly:
Today Celsius's drinks are being replicated everywhere. And because demand for these drinks comes primarily from marketing and distribution rather than differentiation, this space is vulnerable to the influencer economy. Celebrities, through their popularity, have lower barriers to launching their own brands... These all have "better-for-you" elements, such as low or zero calories, vitamins and other nutrients, and interesting flavors. This commoditization has eroded Celsius's novelty.
On the distribution side of demand, retailers are increasingly launching their own private labels, compressing Celsius's possible shelf space and [stock-keeping unit] velocity... Private labels are also often cheaper: Amazon's pack of 12 is currently 20% cheaper per ounce than a Celsius pack of 12 on Amazon.com.
Laksa also noted there's a risk of cannibalization, which the market has underpriced:
... especially with Celsius's decision to onboard Alani onto Pepsi's distribution network. In response to concerns about cannibalization in the Q1 earnings call, management says cannibalization has been "somewhat minimal," citing crossover purchasing with Celsius and Alani at 15%. But crossover selling is a poor metric for cannibalization. It only tracks customers who have bought both products, disregarding those who buy Alani instead of Celsius.
Here are three reasons for textbook cannibalization risk: 1) both brands have functionally similar drinks, 2) both brands' marketing leans feminine, and 3) both brands will together be distributed through the same Pepsi network soon.
They concluded by citing three catalysts for the short:
Slowing sales growth: I recommend tracking Celsius's growth ex-Alani. If Celsius-only growth is negative or flat for at least the next few quarters, it signals the party is over, and the stock could rerate soon. And if overall growth is especially slower than expected in Q1 2026 and onwards, it could mean Alani is cannibalizing sales and consumer demand for sugar-free energy drinks has spread itself out across several market players.
Pepsi "inventory optimization": As Pepsi transitions to distributing Alani, it requires inventory stocking. Q4 2025 and Q1 2026 revenues could be boosted due to high receivables from Pepsi stocking up, but in later quarters Celsius and Pepsi need to execute flawlessly to avoid revenue misses from Pepsi's "inventory optimization" and persistent earnings quality issues. I expect the stock to fall if accounts receivable hikes additionally for the next few quarters, bringing [days sales outstanding] to uncomfortable levels, and if more unfavorable terms are added to the Pepsi agreement.
Regulation: The UK has already drafted a law currently open for public comment. More countries could follow, including the US, who seems to be prioritizing preventive health legislation today. Safety regulation can especially hurt the perception of a health-forward brand like Celsius; US regulation would materially move the stock.
I think both the bulls and the bears make strong arguments. If I were forced to go long or short, I'm not sure which side I'd take. (Regardless, I don't recommend shorting stocks in general.)
But here's the beauty of investing: I'm never forced to do anything. If I'm not sure about a stock, then it's an easy pass.
But my team and I at Stansberry Research will continue to follow Celsius. If we decide it's time to buy, as always, Stansberry's Investment Advisory subscribers will be the first to know. You can become one by clicking here.
Best regards,
Whitney
P.S. I welcome your feedback – send me an e-mail by clicking here.
P.P.S. Susan and I are enjoying Venice, which, along with Paris, is the most romantic city in the world in my book. Yesterday, we visited the famous Venice Biennale art festival, which features national pavilions from 99 countries. Here are some pictures:
