Shares of Celsius, the third-largest energy drink brand in the United States, experienced a 44% increase this week as of 11 a.m. ET on Friday, according to data from S&P Global Market Intelligence.
Although the company reported satisfactory fourth-quarter results on Thursday, the announcement of a major acquisition was the highlight and contributed to the stock’s significant rise.
Celsius revealed it had acquired Alani Nu, the fourth-largest energy drink brand in the country, for $1.65 billion. The company paid less than three times sales and 12 times “fully synergized” earnings before interest, taxes, depreciation, and amortization (EBITDA) for this acquisition.
The purchase price is justifiable given that Alani Nu’s energy drink sales have grown by 50% annually over the past three years. Together, the two brands now hold a 16% share of the U.S. energy drink market, which is projected to grow by 10% annually through 2029.
The combined growth of both brands is notable, as their retail sales in 2024 increased by more than twice that of Red Bull, the leading brand in the energy drink market.
Regarding Celsius’ earnings, the company saw a 22% increase in retail sales for 2024, although its overall revenue only rose by 3% during the year, attributed to the timing of its sales to its primary distributor, PepsiCo. This growth is a departure from the triple-digit increases seen a year prior, but the gain of 160 basis points in market share in 2024 is an encouraging development.
With expectations that Alani Nu will be cash-accretive in 2025 and potentially benefit from Pepsi’s distribution network, Celsius remains a promising growth stock, although investors will need to remain patient.
