Celsius Holdings, Inc. (CELH) stock intrinsic value fair value estimate & owner earnings analysis

Celsius Holdings sells energy drinks under three brands. CELSIUS is its original fitness-oriented drink, launched in 2005. It bought Alani Nu on April 1, 2025 for $1,275.0 million in cash plus 22.45 million shares. It bought Rockstar's U.S. and Canadian business from PepsiCo on August 28, 2025. Revenue was $2,515.3 million in 2025. About 96% came from North America and the rest from Europe (mainly Finland and Sweden), Asia-Pacific and other markets. PepsiCo is both the main distributor and the largest customer, at 43.2% of 2025 revenue. Costco was another 10.8%. Under distribution agreements revised with the Rockstar deal, Pepsi distributes all three brands in the U.S. and Canada. It has also agreed to prioritise Celsius's energy drinks in its U.S. system and to let Celsius steer energy-drink shelf placement there. Neither side can end the agreement without cause before a notice window in 2041. How we measure earnings. We value the cash left for common shareholders after everything needed to keep the business running. We start with operating cash flow and strip out working-capital swings. We then subtract stock-based pay as a real cost, and only the capital spending needed to maintain the business, not to grow it. Finally we subtract about $56.8 million a year of cash dividends on PepsiCo's two series of 5% convertible preferred stock, which have a stated value of about $1,135 million and rank ahead of common shareholders. We treat write-downs of receivables and inventory as ordinary costs. Because this cash is measured after interest, we do not also subtract debt; borrowing risk is carried in the bear case. Measured this way, the record is uneven: $0.71 per share in 2023, $0.45 in 2024 and $0.26 in 2025. 2024 absorbed an accrual of roughly $50 million for the Strong Arm Productions lawsuit. In 2025 the company paid $327.5 million in fees to end contracts with Alani Nu's former distributors so Pepsi could take over. Pepsi agreed to reimburse up to $275.0 million of that. The reimbursement is booked as revenue spread over about 17 years rather than set against the charge. A similar $193.8 million termination charge caused a loss in 2022. The 2025 acquisitions made this a different and much larger business, so we start from 2025. We add back the after-tax termination charge and remove the non-cash revenue from Pepsi's reimbursements. That gives about $1.21 per share. We kept $44.9 million of 2025 acquisition and integration costs in, because the company has made acquisitions repeatedly. The first half of 2026 points higher. Excluding a further $85.3 million of distributor termination charges, results ran at roughly $1.70 per share a year, helped by a full period of Alani Nu and Rockstar. Reported owner earnings fell 43% in 2025 because of the one-off charges. Our base case assumes $1.55 for the coming year, below the first-half pace for two reasons. First, gross margin fell to 48.1% in the second quarter of 2026 from 51.5% a year earlier as the lower-margin Rockstar brand was added. Second, second-quarter revenue rose only about 11% even with Rockstar included, which suggests growth of about 5% for the existing brands. Base case, $26.65 per share. Owner earnings of $1.55 next year, growing 5% a year for four years. The CELSIUS brand grew about 7.5% in 2025 after 2.9% in 2024, and recent quarters point to mid-single-digit growth. Growth then slows to 3% for five years, stays flat until the 2041 window in the Pepsi agreement, and declines 5% a year after that. We have no evidence that the distribution arrangement or the brands' current strength lasts beyond that point. Bear case, $9.56 per share. Owner earnings of $1.25 next year, then declines of 4% a year for four years and 6% a year for five, followed by a 10% annual fade. The evidence behind this case: - Core-brand growth fell from about 100% in 2023 to 2.9% in 2024. - The Rockstar brand earns lower margins. - One distributor-customer accounts for 43% of sales. - A $698 million floating-rate term loan is due April 1, 2032. - $59.5 million is set aside for the Strong Arm lawsuit. - Distributor-termination costs have recurred, in 2022, 2025 and 2026, so we charge them twice more. Bull case, $48.61 per share. The first-half 2026 pace of about $1.72 holds, and earnings grow 10% a year for four years. The evidence: Alani Nu beat its revenue target and triggered the full $25 million earn-out; European revenue grew 17.6% and Asia-Pacific 129% in 2025; and Pepsi's new commitment to prioritise the portfolio has only just begun. Growth then slows to 6% for five years and 3% for five, earnings stay flat until the agreement's 2051 window, and a 3% annual decline follows. The preferred stock converts at $25.00 (Series A) and $51.75 (Series B), which would add about 33.3 million shares and end the dividends. At our base value the two effects roughly offset, so we kept the dividend treatment. Amortisation of intangible assets from the Alani Nu purchase (about $24 million a year) is added back. The decline built into every case after the Pepsi horizon stands in for that wasting asset. The margin-of-safety price is $15.50, about 42% below the base value. That discount reflects a crowded consumer category, heavy reliance on Pepsi, a business reshaped only in 2025, and new borrowing. The value would be too high if the Pepsi relationship weakened, if Alani Nu faded as fast as it grew, or if the CELSIUS brand began to shrink. Some 2026 interim cash-flow items are not separately disclosed, so the non-cash amortisation of the payment to Pepsi for the first half is estimated from its 17-year schedule.