Celsius Holdings shares jumped Friday and are on pace for their highest close in 14 months after the energy drinks maker signed a distribution deal with PepsiCo that expands the two companies' partnership.
In a deal announced early Friday, PepsiCo will begin distributing Celsius' Alani Nu brand in the U.S. and Canada. In addition, Celsius acquired the Rockstar Energy brand in the U.S. and Canada from PepsiCo, which will continue to own the brand abroad.
Celsius Holdings will become PepsiCo's energy-drink lead in the U.S., managing the Celsius, Alani Nu and Rockstar Energy brands. And PepsiCo will lead distribution for the Celsius Holdings portfolio in the U.S. and Canada.
As part of the deal, PepsiCo acquired $585 million in newly issued convertible stock, bringing its stake in Celsius to 11%.
In 2022, PepsiCo invested $550 million for an 8.5% stake in Celsius in a deal that made PepsiCo the distributor of Celsius products. In January 2024, the two companies grew their partnership as Celsius expanded into Canada, the U.K. and Ireland. PepsiCo became its distributor in Canada.
Jefferies analyst Kaumil Gajrawala said the latest deal puts to rest concerns over the PepsiC0-Celsius partnership with a stronger bond now in place, TheFly.com reported. Celsius becomes a revenue acceleration story by gaining greater control over execution and strategy. The analyst reiterated a buy rating and 64 price target on Celsius stock.
Celsius Stock Analysis
Celsius stock has a Composite Rating of 83 as it turns itself around. The company began a slump in the third quarter of 2024, when it posted an earnings decline of 101% and further declines over the next two quarters, according to FactSet. Sales fell 4% to 31% over those periods.
In the second quarter, the company returned to profit growth with an 18% rise in EPS. Sales rebounded 84%. Analysts expect earnings in the current quarter of 30 cents a share, vs. a flat bottom line a year ago. Sales are seen surging 160% to $690.2 million, per FactSet.
An outstanding rebound over the past six months has helped Celsius rise to the No. 2 spot in IBD's nonalcoholic beverages industry group.
Celsius stock rose nearly 6% Friday morning, and is on track for its highest close since June 2024. The stock cleared a five-day pullback that offers an aggressive entry at 63. It's a risky entry because the stock still has some overhead supply to work through above the 65 level. Also, it has already gone up substantially in six months.
The stock has tripled in price since the February lows, but it remains 36% below its all-time high near 100 reached in March 2024. The company was in the IBD 50 at the time. But Celsius stock lost as much as 79% of its value from a failed breakout in May 2024. It slid to its low nine months later.
PepsiCo stock rose about 1% and remains a laggard with a Composite Rating of 38.