Prediction: A Turnaround Could Be Near for Celsius

Celsius (NASDAQ: CELH) just reported another quarter of falling revenue, but a turnaround could be around the corner for the energy drink maker. The stock has already gotten off to a strong start in 2025, up about 33% year to date as of this writing. However, it is still down by more than 50% over the past 12 months and off by more than 60% from its peak.

Here's why a turnaround for the business could be near.

Image source: Getty Images

Alani Nu to the rescue

Celsius stock came under pressure last year as the company's sales growth slowed and then turned negative after its largest distributor, PepsiCo, reduced its orders to compensate for having previously purchased more inventory than it turned out to need.

The revenue decline continued into the first quarter of 2025, with overall sales dropping by 7% to $329.3 million and badly missing analysts' consensus estimates of $344 million.

North American sales sank 10% to $306.5 million, a result that management blamed on PepsiCo's distributor incentive program and elevated retail promotional allowances. It noted that according to numbers from market research firm Circana, Celsius had maintained a 10.9% dollar share in the energy drink category. It also noted that retail scanner data indicated the brand saw a 2% increase in sales.

Meanwhile, management said it expects to win increased retail shelf space this spring. The company was particularly excited about gaining cold placement space near the checkouts at some large national retailers. Between the better placement and the draw of new products such as its Retro Vibe and Mango Lemonade flavors, the company anticipates more impulse purchases.

The international segment remained a bright spot -- overseas sales soared by 41% to $22.8 million. The company said it saw strong organic growth in both legacy markets and newer expansion markets.

Its gross margin expanded by 110 basis points to 52.3%, an improvement the company credited to sourcing efficiencies for raw and packaging materials. Given the increased incentives and allowances in the quarter, that was a solid showing. Notably, management said it does not see tariff-boosted aluminum costs having a significant impact on its expenses yet. It continues to project gross margins of around 50% for the year.

However, corporate expenses jumped 22%, which, together with falling sales, led to a 33% decline in adjusted earnings to $0.18 per share. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA), meanwhile, dropped by 21% to $69.7 million.

While the quarterly results were disappointing, there are reasons for optimism. The company closed its deal to buy the popular energy drink maker Alani Nu at the start of April. Celsius said that combined, its two brands have a 16.2% dollar share of the energy drink category and accounted for approximately 20% of its total dollar growth in the first quarter.

Alani Nu has been growing quickly and taking share in the energy drink market, where the brand has particularly resonated with female consumers. Its sales rose a whopping 88% in Q1, and the company earlier announced that the brand had surpassed $1 billion in sales over the 52-week period that ended April 13. Alani Nu had a 5.3% market share, which was up 221 basis points.

Celsius should now be able to follow the same playbook it devised for its namesake brand with Alani Nu to continue to grow that brand's sales and market share. This will largely be about increasing distribution with the aid of its U.S. distribution partner, PepsiCo. Once the beverages are in more stores, the company will look to expand the shelf space dedicated to them. Being part of a larger company will also mean the Alani Nu brand has more marketing muscle behind it.

Is it time to buy the stock?

With Alani Nu now in the fold, I'd expect the company to return to growth mode in the coming year. Celsius has already previously talked about getting 15% to 20% more shelf space this year; changes on that front typically happen in the spring. This alone should be a growth driver. Its purchase of bottler Big Beverage should also give it more flexibility to innovate and offer limited-time offerings, which can also drive sales.

In addition, one of the best times to buy a consumer goods company is ahead of a distribution expansion. While Alani Nu has shown great growth so far, Celsius, with its PepsiCo distribution agreement, will be able to get it into more convenience stores, which are the largest sellers of energy drinks. Alani Nu also tends to have less placement than Celsius beverages, which offers additional upside potential.

Both brands also have huge opportunities to expand internationally, joining leading energy drink brands Red Bull and Monster Beverage, each of which has a big international presence. So expanding more aggressively internationally could lead to strong growth in the years ahead.

With Alani Nu in the fold and shelf space gains on the horizon, I expect Celsius to return to growth mode later this year, which should help propel the stock upward from here.

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Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Celsius and Monster Beverage. The Motley Fool has a disclosure policy.