Celsius Earnings: Distribution Gains and Strategic Brand Investment Drive Strong Performance

No-moat Celsius’ shares surged around 20% after reporting fourth-quarter sales of $347 million (up 95%) and $0.17 in earnings per share (up 242%) that topped FactSet consensus by 4.8% and 8%, respectively, with a milder outperformance than in the first three quarters of the year. However, 2023 sales of $1.3 billion and a 20.2% operating margin largely matched our estimates. We think the market’s reaction reflects the firm’s progress in core initiatives such as expanding distribution points, new product launches, and market share gains. However, our take is more tepid. We expect to raise our $33 fair value estimate by a mid-single-digit percentage to account for slightly greater revenue growth and the time value benefit, partially offset by higher-than-anticipated advertising spending, but shares remain richly valued. While we remain sanguine about Celsius’ health-centric offerings and PepsiCo’s distribution strides, we caution investors on the challenge of gaining market share from dominant players like narrow-moat Monster and Red Bull, especially as rivals intensify innovation and pricing competition over time.