By Celsius Holdings Inc (NASDAQ: CELH) tanked well over 25% this morning even after the fitness and energy drinks specialist reported market-beating financials for its third quarter (Q3).
What spooked investors was primarily a $247 million distributor termination charge related to its transition into PepsiCo’s distribution network.
While substantial, it’s a one-time hit only – and PepsiCo is footing the bill.
So, the subsequent sell-off on Thursday sure looks rather overdone. But does that mean the post-earnings decline is a gift for long-term investors?
Perhaps not. Why? Because the company’s financial release revealed several structural weaknesses that suggest Celsius stock is still trading beyond its means.
Core brand weakness poses a threat to Celsius stock
Celsius continued to see explosive top-line growth in its fiscal Q3, but its flagship CELSIUS brand showed signs of fatigue.
Retail sales for the core brand rose just 13% year-on-year, a notable deceleration compared to prior quarters.
Even more concerning was its US market share losing 50 bps – indicating competitive pressure and possible saturation.
In a category driven by brand loyalty and shelf velocity, losing ground, even marginally, can signal deeper demand erosion.
Investors must, therefore, question whether CELSIUS has now seen peak growth trajectory.
Because if that’s the case, valuation multiple on CELH shares, built on solid growth assumptions, could compress rather significantly heading into 2026.
Heavy reliance on acquisitions is a red flag for CELH shares
Celsius is driving the majority of its revenue growth from newly acquired brands – and that could prove a major overhang for its stock price moving forward.
In the third quarter, Alani Nu, a brand CELH acquired earlier this year, posted a remarkable 114% year-over-year increase in retail sales.
This uneven performance underscores the company’s growing dependence on acquisitions to drive expansion.
While such transactions can be accretive, they also introduce integration risk and dilute visibility into organic performance.
If CELH’s growth story is shifting from brand-driven to portfolio-driven – if future upside hinges on a bolt-on deal rather than core execution – Celsius shares could lose their premium narrative and face valuation headwinds in 2026.
Debt and inventory concerns remain an overhang on Celsius
Finally, the transition to PepsiCo’s distribution system has introduced new financial complexities.
Long-term debt has risen, and inventory dynamics are in flux as Celsius Holdings shifts logistics and fulfillment.
These changes may distort near-term financials, making it harder for investors to assess true operating performance.
Moreover, the distributor termination charge, though funded by PepsiCo, adds noise to the income statement and raises questions about future restructuring costs.
In a high-growth consumer brand, clarity and consistency are critical.
The current opacity around inventory levels, debt servicing, and transitional accounting may erode investor confidence in CELH stock – and invite scrutiny from analysts focused on cash flow and margin durability.
Put these risks with Celsius’ premium valuation of about 53 times forward earnings, even after the post-earnings dip, and the stock immediately starts to look super unattractive to own heading into 2026.
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