We came across a bearish thesis on Celsius Holdings, Inc. (CELH) on Substack by The Dutch Investors. In this article, we will summarize the bears’ thesis on CELH. Celsius Holdings, Inc. (CELH)’s share was trading at $31.25 as of March 20th. CELH’s trailing and forward P/E were 69.44 and 35.34 respectively according to Yahoo Finance.
A colorful display of sparkling waters, juices, energy drinks and carbonated soft drinks on a convenience store shelf, emphasizing the company’s impressive beverage portfolio.
Celsius Holdings has undergone a fundamental shift following its $1.8 billion acquisition of Alani NU, altering its growth trajectory and strategic outlook. Previously, the company’s investment thesis was built on organic growth, a rapidly expanding market share, and increasing profitability. With a dominant position in the health-conscious energy drink segment, Celsius had capitalized on shifting consumer preferences, securing a 10% U.S. market share and benefiting from its 2022 PepsiCo distribution partnership. However, the recent acquisition raises critical questions about whether Celsius is strengthening its competitive advantage or signaling weakness in its organic growth potential.
On the surface, the acquisition appears to be a strategic move that enhances Celsius’ market presence. By acquiring Alani NU, Celsius now holds a 14% combined U.S. market share, increasing its scale advantages in production, distribution, and branding. The deal was also financially attractive—Celsius raised capital at 21x adjusted EBITDA while purchasing Alani NU at just 13x, suggesting a favorable valuation. With Alani NU generating $595 million in revenue and experiencing similar growth rates, the acquisition has the potential to accelerate Celsius’ expansion into new demographics, particularly among health-conscious female consumers. Moreover, the company’s minimal international footprint means that significant growth opportunities remain, especially as American beverage trends tend to influence global markets.
However, the acquisition raises concerns about Celsius’ ability to sustain organic growth. Historically, energy drink giants like Red Bull and Monster carved out market dominance through organic expansion rather than acquisitions. Celsius’ rapid rise was based on counter-positioning itself against traditional brands, but it now faces increasing competition from well-funded rivals like Bang Energy, ZOA, NOS, and C4, all backed by major beverage companies. The acquisition of Alani NU suggests that instead of relying on internal growth strategies—such as further penetration in the U.S. or international expansion—Celsius opted to buy growth. This shift raises doubts about its long-term competitive moat, especially as distribution partnerships have become a standard requirement rather than a unique advantage.
The deal also introduces financial and operational risks. Celsius had to take on debt to finance the acquisition and will issue $500 million in stock, leading to approximately 9% dilution. Additionally, corporate acquisitions often struggle to deliver expected synergies, and Celsius’ use of “Adjusted Synergized EBITDA” raises concerns about financial transparency. The limited available financial data on Alani NU further complicates the outlook, as its revenue growth could be artificially inflated by distributor overstocking, a challenge Celsius itself has faced in the past.
Ultimately, Celsius remains a leader in the health-focused energy drink space, but its decision to acquire Alani NU signals a shift in strategy that introduces new uncertainties. While the deal could strengthen its market position and unlock synergies, it also raises concerns about the company’s ability to grow organically and maintain a sustainable competitive edge. If integration challenges arise or the expected synergies fail to materialize, the acquisition could prove to be a misstep rather than a strategic advantage.
Celsius Holdings, Inc. (CELH) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 33 hedge fund portfolios held CELH at the end of the fourth quarter which was 29 in the previous quarter. While we acknowledge the risk and potential of CELH as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than CELH but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.