Energy-Drink Maker Celsius’s Record Run Stings Short Sellers

Energy-Drink Maker Celsius’s Record Run Stings Short Sellers

Investors making bearish wagers against Celsius Holdings Inc. are licking their wounds after the energy-drink maker set record closing highs in three of the past four sessions.

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(Bloomberg) — Investors making bearish wagers against Celsius Holdings Inc. are licking their wounds after the energy-drink maker set record closing highs in three of the past four sessions. 

Shares traded above $91 on Friday, another all-time high. The company — which claims its drinks have calorie-burning properties — has been snapping up market share from its heftier peers, Monster Beverage Corp. and Red Bull GmbH, according to Circana data. That’s helped fuel a more than 60% rally year-to-date, leaving short sellers looking at paper losses of about $1.25 billion, according to data from S3 Partners LLC. 

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The stock’s advance defies the pressures spilling across the broader food and drink industry from a new crop of appetite-suppressing weight loss drugs. The brand’s positioning as a cleaner, healthier alternative and partnership with PepsiCo. have helped it outperform rivals despite increasing competition.

Celsius is “a disruptor within non-alcoholic beverages, a disruptor within energy drinks, and you really saw them over the course of 2023 transform the business,” according to Gerald Pascarelli, a Wedbush analyst. “Their velocities in terms of consumer takeaway trends, continue to outpace peers and it’s resulting in pretty significant market share gains, which has been very consistent.”

Celsius’s share of the energy-drink market in dollars approached 12% in February as the top two competitors, Monster and Red Bull, fight to hold onto their claims of roughly a third of the market each. Celsius’s foothold has helped the stock, which over the past year has more than tripled, while Coca-Cola Co.-partnered Monster has risen about 15%. 

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Last week’s earnings — which showed annual revenue doubling from the prior year — were also a boon for shares. Stock bears had concerns about whether Celsius could sustain its strength heading into the report, those investors are now covering their short positions, according to Cowen analyst Robert Moskow. 

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“Given the high short interest heading into the print, this commentary blew a hole in the bear thesis that distribution was fully cooked and that top-line growth would be harder to come by going forward, sending shares higher,” Moskow wrote in a note dated March 1. 

Wall Street is predominantly bullish on Celsius with 15 analysts rating the stock a buy, only two assigning it a hold and one a sell. But the stock’s sizzling rally has left nearly half the analysts’ price targets straining to keep up with the share price, suggesting Celsius may be near a peak. 

On Monday, Wedbush dropped Celsius from the bank’s best ideas list. “Some of the upside had been expedited over the strength really seen over the course of February, certainly on earnings day,” Pascarelli said. 

Still, he rates the stock outperform. With Monster expected to raise prices later in the year that could drive Celsius to follow suit and be positive for sector margins, according to Pascarelli.

Bloomberg Intelligence analyst Kenneth Shea sees Celsius’s growth as sustainable. He views the upstart company as a pure energy-drink play in “arguably one of the best categories within the whole packaged beverage space.”

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“Celsius is growing at higher rates from a smaller base and investors pay up for growth, so that’s been a lot of the fuel behind Celsius,” Shea said.

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