Celsius: Launching Coverage With a No-Moat Rating and $33 Fair Value Estimate; Shares Overvalued

We’re initiating coverage on energy drink brand Celsius with a no-moat rating and a $33 fair value estimate, which leaves shares trading around a 60% premium to our intrinsic valuation. Despite the firm’s strong position in the reduced-sugar energy drink niche and compelling near-term growth narrative, we believe the market overvalues its ability to wrestle market share from entrenched competitors like narrow-moat Monster and Red Bull and to defend against new entrants in the longer term. Fundamentally, Celsius’ strategy seems replicable, and we anticipate that resource-rich rivals are likely to ramp up innovation to bolster their better-for-you offerings, challenging the firm’s narrow focus on the segment.