Is Celsius Stock a Buy, Sell, or Hold in 2025?

From 2020 to 2023, Celsius Holdings (NASDAQ: CELH) went on a meteoric rise from a virtually unknown energy drink brand to the No. 3 energy drink label in the U.S., behind Red Bull and Monster.

However, in 2024, the stock suddenly felt the gravitational pull of the stock market and plunged as sales fell after PepsiCo, its minority owner and distribution partner, cut back on purchases after accumulating too much inventory.

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As a result, Celsius is entering 2025 as a battleground stock. Some investors believe it's a drop-dead bargain, now trading at a 67% discount from its peak about a year ago. However, 21% of the stock is sold short, indicating that a substantial number of investors are betting on the stock to fall further.

So, is Celsius a buy, sell, or hold in 2025? Let's take a look at where the company stands and what its prospects for the year look like now.

Image source: Celsius Holdings.

The numbers are ugly

Due in part to the inventory mismatch at Pepsi, Celsius continues to report quarterly numbers that look downright dismal. In the fourth quarter, revenue fell 4% to $332.2 million, and it reported a loss based on generally accepted accounting principles (GAAP) of $18.9 million. Adjusted earnings per share fell from $0.17 to $0.14.

According to data from Circana, an industry tracker, U.S. retail sales of Celsius rose 2% in the fourth quarter, and dollar share in the energy drink category declined from 11.4% to 10.9%. For the full year, U.S. retail sales jumped 22%, showing a sharp slowdown at the retail level in the fourth quarter.

There were some bright spots in the quarter, however. Gross margin improved from 47.8% to 50.2% due to lower outbound freight and materials expenses, and international sales continued to grow briskly, up 39% to $20.3 million, which is just 6% of overall revenue.

Despite the weak results from Celsius, the stock soared following the earnings report, which seemed to be due to the beaten-down share price coming into the report and its acquisition of Alani Nu, a fast-growing energy drink and snack brand catering to Gen Z and millennial women.

Is the Alani Nu acquisition a game-changer?

Celsius has agreed to pay $1.8 billion, or a net of $1.65 billion, including tax assets, for Alani Nu in a mix of cash and stock. Alani Nu is now the fourth-largest energy drink brand in the U.S. and is growing rapidly.

In 2024, it brought in $595 million in revenue with a compound annual growth rate of 50% over the last three years. In 2024, retail sales jumped 64%, better than any other large energy drink brand. It's also profitable with adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $137 million, and it offers a wide range of products, including energy drinks, shakes, and snacks like bars.

Both brands are known for wellness and sugar-free products and have outperformed the category in recent years. Therefore, they seem like a good fit together as their positioning is similar, and they can continue to take market share from more entrenched energy drink players. Together, the company will have a 16% category share in energy drinks, and that's expected to grow.

Overall, the company expects $50 million in synergies, accelerated top-line growth, and for the acquisition to be cash EPS accretive in the first year. Mergers and acquisitions is a popular form of growth in the beverage industry. Coca-Cola and Pepsi have a history of swallowing up smaller brands, so it's not surprising to see Celsius pull this lever, especially at a time when the core brand is struggling.

Given the fit between the two brands, Alani's strong growth, and the reasonable valuation in the buyout, it looks like a smart move for Celsius.

Should you buy, sell, or hold Celsius?

At this point, I'd call Celsius a cautious buy for 2025. The company does not give guidance, so it's unclear what investors should expect as far as financial results for 2025. However, management acknowledged that increasing competition in the sugar-free category has eaten into the company's growth, and that's likely to remain a challenge this year.

The company should continue to benefit from the Pepsi distribution partnership and is expanding the number of stores it's available in. The Alani Nu deal looks like a smart move to grow the overall business, and the stock is well-priced if it can return to steady growth.

Celsius has a lot to prove this year, but there's plenty of upside to the stock if management can get it right.

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Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Celsius. The Motley Fool has a disclosure policy.