To The Moon

$Celsius Holdings, Inc.(CELH)$

Celsius Holdings’ latest quarter delivered a striking proof point that its “modern energy” platform is working at scale. The first full-quarter consolidation of Alani Nu, acquired earlier this year, transformed the P&L: sales surged, adjusted profitability leapt, and retail takeaway accelerated across key channels. Yet, after a sharp post-earnings rally, valuation has again sprinted ahead of fundamentals. The result is a compelling operating story whose stock still embeds a generous perfection premium.

Performance Overview and Market Feedback

The headline numbers impressed. Second-quarter revenue climbed 84% year over year to a record ~$739.3 million, materially above consensus. Diluted EPS was $0.33 versus $0.28 a year ago; on an adjusted basis, EPS reached $0.47 as integration and mix tailwinds showed through. Shares jumped as much as ~20% on the print as investors recalibrated growth and margin trajectories higher.

Beneath the top line, mix was the star. The Alani Nu brand contributed ~$301.2 million—effectively a breakout quarter—and retail takeaway rose 129% year over year for the 13 weeks ended June 29, sharply outpacing the category. Celsius’ core brand, after three softer quarters earlier in the year, returned to growth with revenue up ~9% and sequential retail sales up ~18%—a notable re-acceleration that soothed concerns about decelerating velocities. The combined U.S. dollar share reached ~17.3% (11% Celsius, 6.3% Alani Nu).

The tape responded accordingly. Multiple outlets highlighted the beat/raise dynamic and the category share gains, with commentary pointing to short interest and positioning as amplifiers of the post-print move. Still, the relief rally does not erase the reality that Celsius is now being valued as an execution-flawless compounder.

A Category Leader With a Bigger Engine

Celsius closed on Alani Nu this spring, creating one of the fastest-growing, better-for-you energy portfolios in the U.S. The strategic rationale was twofold: amplify scale (from procurement to shelf space) and broaden reach into a consumer set—especially younger women—where Alani Nu over-indexes. Management framed the deal as cash EPS-accretive in year one, with identifiable cost synergies over two years. Early returns suggest the thesis is tracking.

The combined platform also tightens Celsius’ relationship matrix across the beverage ecosystem. PepsiCo remains a key distribution and strategic partner for Celsius, and its filings underscore the value of that equity tie. Meanwhile, Alani Nu’s momentum at retail enhances Celsius’ bargaining power with retailers as shelf resets and cooler door allocations for energy drinks intensify into 2026.

What Changed in the Quarter

Two developments matter most:

1. Alani Nu’s incremental scale. The brand’s $300M+ quarterly contribution was bigger and earlier than many models implied. That scale lifts the denominator on fixed costs and creates a sturdier platform for procurement and co-packing as Celsius expands innovation and limited-time-offer (LTO) cadence.

2. Celsius core stabilization. After a reset phase tied to order patterns and channel normalization earlier in the year, the core brand’s single-digit growth with improving sequential trends reduces the risk that Alani Nu is merely masking an underlying slowdown. It also suggests the “zero sugar / functional” value proposition remains resonant at higher price points.

Current Fundamentals and Cash Flow

Margins. Consolidated gross margin was 51.5%, down 50 bps year over year as Alani Nu’s initial margin profile and a non-cash inventory step-up partially offset favorable price/mix and lower input costs. Importantly, management cites mix, material costs, and freight as tailwinds—drivers that, alongside synergy capture, should support margin durability above the 50% threshold.

Operating leverage. SG&A rose as a percentage of sales (32.2%) on integration costs, earn-out recognition, and investment behind the “Live. Fit. Go.” brand campaign. As deal costs fade and integration matures, SG&A intensity should drift lower, allowing adjusted EBITDA margins to push higher from current levels. Adjusted EBITDA more than doubled year over year to ~$210 million in Q2.

Balance sheet and liquidity. Celsius ended Q2 with ~$615 million in cash and a meaningfully larger asset base reflecting the Alani Nu acquisition (brands and goodwill). While cash declined from year-end due to deal funding, the company retains ample liquidity to support innovation, international expansion, and working capital needs tied to higher volumes.

Cash flow. The reported tables emphasize income statement and balance sheet items more than the cash flow statement in summaries; however, management continues to frame the transaction as cash EPS-accretive in year one with identifiable cost synergies—implications that align with stronger cash generation as integration benefits accrue.

Financial Highlights and Valuation

Category share and retail takeaway. For the 13 weeks ended June 29, Celsius Holdings (Celsius + Alani Nu) held ~17.3% U.S. RTD energy share, up 180 bps year over year. Alani Nu’s retail sales grew 129% year over year; Celsius brand grew 3% year over year with strong sequential improvement.

Profitability trajectory. Q2 adjusted EBITDA was ~$210 million; annualizing that run-rate implies ~$800-850 million. While seasonality and investment cadence will inject noise, the direction is unmistakable: Celsius has shifted from a niche insurgent to a scaled, highly profitable platform with >50% gross margins.

Capital structure. With ~260 million diluted weighted-average shares in Q2 and a market capitalization around $15–16 billion at recent prices, the enterprise value is roughly in the mid-$16 billions. On an annualized Q2 basis, that places the stock near ~19–20x EV/adj. EBITDA and ~5–6x EV/Sales—rich versus most beverages, but not unprecedented for high-growth category leaders.

P/E optics. Using GAAP diluted EPS of $0.33 in Q2 (~$1.32 annualized) yields a ~45–50x GAAP P/E at $60–61. Using adjusted EPS of $0.47 in Q2 ($1.88 annualized) implies ~32x “run-rate” P/E. The range underscores why bulls lean on adjusted metrics while bears argue the GAAP conversion remains demanding.

Street reaction. Coverage framed the quarter as a clean beat/raise fueled by Alani Nu’s outperformance and a healthier Celsius core. Media and analyst notes highlighted the upside surprise on revenue and adjusted earnings, with some pointing to the above-average short interest as a possible accelerator of the rally.

Strategy Check: Why Alani Nu Matters

Alani Nu adds more than dollars. It brings:

• Demographic expansion. The brand is especially strong with female consumers—an underpenetrated segment for legacy energy players—unlocking a differentiated marketing voice and flavor architecture.

• Innovation cadence. Alani Nu’s LTOs and flavor drops have proven velocity drivers, which Celsius can scale across broader retail networks. Q2 commentary noted record Alani Nu sales fueled in part by LTO performance.

• Procurement and co-packing leverage. A larger system smooths volume through plants, supports multi-brand promotions, and strengthens negotiating leverage with suppliers and retailers. Management targets ~$50 million of run-rate cost synergies over two years.

Risks and Friction Points

• Integration execution. Folding in a hypergrowth brand without blunting its edge is delicate. Culture, innovation speed, and marketing autonomy are real considerations. Management flagged integration as a core priority.

• Margin mix. Initial Alani Nu margins trailed Celsius’ consolidated margin, and the quarter included an inventory step-up that weighed on gross margin by design. Sustained >50% gross margin depends on synergy capture, pricing power, and freight/material discipline.

• Channel dynamics. Cooler space is zero-sum. Competitors (notably Monster, Red Bull, and newer entrants backed by large bottlers) will contest every door. Keurig Dr Pepper’s push with Ghost and others keeps the category competitive.

• Concentration. Celsius’ U.S. distribution partnership with PepsiCo is a strategic asset, but it introduces dependency risk; Pepsi’s filings spotlight the financial tie. Any renegotiation or channel conflict would be a watch item over the medium term.

Why the Stock Bull

1. Category momentum + portfolio breadth. Energy remains one of few beverage categories consistently comping high single to low double-digits at retail. With Celsius and Alani Nu both outgrowing the category, share gain math still has room to run, especially as the platform presses into international markets (U.K., Ireland, France, ANZ, Benelux, Nordics) where awareness is building.

2. Margin algorithm improves with scale. Even with a modest mix drag from Alani Nu’s starting margin, the consolidated business already sits above 50% gross margin, and adjusted EBITDA is compounding faster than sales. Synergies and supply chain optimization provide a visible path to structurally higher operating margins.

3. Retailer flywheel. Fast turn, premium price points, and low cannibalization risk versus legacy energy incumbents make the portfolio attractive for category captains and buyers. Each incremental door or facing drives better procurement and ad efficiency per incremental can. Q2’s share gains and sequential acceleration validate this flywheel.

4. Optionality. International distribution remains early, and cross-brand innovation (hydration, functional lines) can open adjacent growth vectors without straying from the “better-for-you” thesis. The combined marketing engine can test flavors and formats quickly across two scaled demand pools.

What Keeps Us Cautious on the Stock

Valuation embeds near-perfection. At ~19–20x annualized run-rate EV/EBITDA and north of 30x run-rate P/E on adjusted numbers, Celsius already prices in multiple years of high-teens to 20%+ revenue growth and sustained >20% adjusted EBITDA margins. Any wobble—be it a slower international build, a few softer LTOs, or integration costs sticking longer—can translate into swift multiple compression.

Category competition intensifying. Ghost, Prime Energy, and others backed by heavyweight bottlers are not standing still. Shelf wars and promotional intensity can nick gross margin, even for premium brands.

Execution bandwidth. Simultaneously integrating a major acquisition, ramping international, and keeping core innovation fresh is a high-wire act. The quarter showed it’s doable; the next six quarters will show if it’s durable.

Valuation Framework: Bridging Narrative and Numbers

To ground the debate, consider three lenses:

1) EV/Sales. With Q2 revenue at ~$739M, an annualized run-rate is ~$3.0B. On a ~$16B enterprise value, that’s ~5.3x forward-like sales—below early-2024 peaks but still a premium to most beverage peers (typically 3–5x for mid-to-high single-digit growers). The premium is justified if the platform sustains double-digit growth and incremental margins remain healthy.

2) EV/EBITDA. Annualizing Q2 adjusted EBITDA (~$210M) implies ~$840M. That yields ~19x EV/EBITDA—expensive next to staples, reasonable versus high-growth consumer comps. Every 100 bps of margin improvement on a $3B revenue base would add ~$30M of EBITDA, compressing the multiple as synergies and scale roll through.

3) P/E. On GAAP, Celsius is still in “invest and integrate” mode ($1.32 annualized EPS from Q2), keeping the GAAP P/E lofty. On adjusted EPS ($1.88 annualized from Q2), the multiple is meaningfully lower but still assumes clean integration and sustained velocity. Investors should triangulate both views to avoid over-relying on add-backs.

What Could Unlock More Upside

• Synergy over-delivery. Management’s ~$50M run-rate cost synergy target over two years looks achievable; exceeding it would flow disproportionately to EBITDA.

• International flywheel. A faster-than-expected ramp in the U.K./EU/ANZ footprint, aided by stronger global distribution partners, would tack on a more durable second growth leg.

• Sustained LTO outperformance. If Alani Nu’s LTOs continue to post outsized velocities without raising promotional intensity, mix could bias margins up despite category competition.

What Could Derail the Thesis

• Integration speed bumps. Any slowdown in Alani Nu innovation cadence, culture clashes, or delayed systems integration could dent growth and inflate SG&A longer than planned.

• Channel friction. Cooler resets are political; losing or failing to gain doors to aggressive rivals can shave points off the growth algorithm.

• Input cost surprises or tariff effects. While Q2 noted minimal tariff impact given FIFO dynamics, any reversal in freight/material costs would test gross margin resilience.

Verdict and Entry Price Zone

Verdict: High-quality operator, premium multiple—maintain discipline. Celsius has executed on the most critical asks this quarter: prove that Alani Nu accelerates growth and that the Celsius core is stabilizing. The platform now commands real category heft, >50% gross margins, and visible synergy levers. But with the stock rallying hard into and after the print, we see better risk-adjusted returns on pullbacks.

Entry price zone (long-term investors):

• Primary accumulate: $50–$55 (roughly ~16–18x annualized EV/EBITDA and ~4.5–5.0x EV/Sales on our simple run-rate math).

• Opportunistic/add: $45–$50 (where the risk/reward turns attractive even under more conservative synergy or velocity assumptions).

These ranges are anchored to the current run-rate framing and assume no fundamental negative surprises; they will move with guidance, execution, and macro. (For traders, expect elevated volatility as consensus models chase the new base and as category data prints monthly.)

Conclusion: A Bigger, Better Celsius—Priced Like It

Celsius has decisively upgraded its growth engine. The Alani Nu acquisition is delivering on scale, mix, and demographic reach; the core brand is back to growth; and margins look sturdier than skeptics feared. The portfolio now owns a credible, differentiated perch in the energy aisle, with international expansion and cross-brand innovation as incremental call options. The stock, however, again bakes in a long runway of near-flawless execution. For investors, the playbook is straightforward: respect the operating momentum, monitor integration and category share monthly, and insist on an entry that gives you a margin of safety against inevitable hiccups in a brutally competitive cooler.

Key takeaways:

1. The first full quarter with Alani Nu drove record revenue ($739M, +84% YoY) and strong adjusted EPS ($0.47).

2. Gross margin held at 51.5% despite inventory step-up and mix; synergy targets offer additional cushion.

3. Retail share rose to ~17.3% (11% Celsius, 6.3% Alani Nu), with Alani Nu retail sales up 129%.

4. Valuation remains rich (≈19–20x EV/EBITDA run-rate; >30x run-rate P/E); patience on entry is warranted.

5. Watch integration cadence, international ramp, and cooler space dynamics as the next catalysts (or risks).