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Investing.com - B.Riley has raised its price target on Celsius Holdings (NASDAQ:CELH) to $75.00 from $56.00 while maintaining a Buy rating following the company’s expanded strategic partnership with PepsiCo. The stock has shown remarkable momentum, surging 144.76% over the past six months and trading near its 52-week high of $63.50. According to InvestingPro analysis, the stock appears overvalued at current levels, though 10 analysts have recently revised their earnings estimates upward.
The partnership includes four key components, with Celsius gaining strategic control over its brand portfolio by becoming PepsiCo’s energy drink captain. Additionally, Alani Nu will transition to PepsiCo’s distribution system in the U.S. and Canada, and Celsius has acquired the Rockstar Energy brand in these markets. With a market capitalization of $16.22 billion and strong financial health metrics according to InvestingPro, Celsius appears well-positioned to execute this strategic expansion.
As part of the agreement, Celsius issued PepsiCo $585 million of new convertible 5% preferred stock as consideration, while extending existing preferred stock to the same conversion period. PepsiCo will also be entitled to a second board director, increasing its ownership of Celsius from approximately 8.5% to 11% on an as-converted basis.
Celsius now holds approximately 20% market share in the U.S. energy drink category following this agreement. The company expects a smoother transition for Alani Nu to PepsiCo distribution than what was experienced during the Celsius brand transition in FY23/24, with most of the Alani Nu DSD transition to Pepsi distribution expected by December 1. The company maintains a healthy balance sheet with a current ratio of 2.11, indicating strong liquidity to support this transition.
The new captaincy enables Celsius to strategically control the allocation of each brand among retailers and channels, as well as planograms, SKU distribution, and promotional strategies. Celsius expects the transaction to be cash accretive to EPS in the first full year.
In other recent news, Celsius Holdings has seen significant developments that are capturing investor attention. The company reported second-quarter earnings that surpassed expectations, with strong performance across key metrics such as top-line growth, gross margin, and operating profit margin. This financial success has led to several analyst firms raising their price targets for Celsius Holdings. UBS increased its target to $64, TD Cowen to $60, Truist Securities to $65, and Stifel to $56, all while maintaining a Buy rating.
Additionally, PepsiCo is set to increase its stake in Celsius Holdings to 11% through a $585 million investment in convertible preferred stock. This deal will also involve Celsius acquiring PepsiCo’s Rockstar Energy brand in the US and Canada. Furthermore, Alani Nu, recently acquired by Celsius, will transition to PepsiCo’s distribution network to enhance its retail availability. These strategic moves are part of Celsius Holdings’ efforts to accelerate growth and strengthen its market position.
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