Morgan Stanley Reiterates Equalweight Rating on Celsius Holdings (CELH)
Morgan Stanley analyst Eric Serotta reiterated an Equalweight rating and $42.00 price target on Celsius Holdings (NASDAQ: CELH).
The analyst comments "Equal-weight Post Alani Acquisition: CLEH jumped +35% after the close yesterday following its announced agreement to acquire Alani Nu for $1.65 billion (net of $150M NPV tax savings) and CELH reporting 4Q sales slightly ahead of lowered expectations. While the acquisition could turn Celsius into a "story stock" again for the next several quarters, which keeps us at EW, we are circumspect over the midterm given the consumer overlap between Celsius and Alani, and continued weak retail sales for the Celsius brand, with risk the deal is done from a more defensive posture. While Alani's energy drink retail sales are up over 70% YTD in Nielsen, and we see distribution growth opportunities if Alani moves to the Pepsi system (which CELH has not commented on), Celsius retail sales are down ~5.5% YTD amid increased competition in the US energy category from Alani as well as Red Bull and Monster innovation in the sugar-free segment (see scanner trends for Celsius and Alani in the body of this report). We estimate only ~4-6% topline growth for CELH over the mid-term assuming the Celsius brand improves to the 3-5% growth range and Alani slows to the HSD range. Post 4Q results, we are lowering our standalone topline estimates for CELH by ~4% to reflect retail sales and market share declines, even with a slight 4Q beat. Significant Consumer Overlap: While CELH played down the consumer overlap between the Celsius and Alani Nu brands, we see similar lifestyle positioning and significant consumer overlap, particularly among women. The brands have ~25% household overlap in Numerator panel data, and we believe that the overlap is even higher among female consumers."
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Shares of Celsius Holdings closed at $25.53 yesterday.