During a shortened week of holiday trading, shares of energy and health supplement drink company Celsius Holdings (CELH 5.01%) were up 17.7%. It was a good start to the month of July after an especially awful month of June. Celsius Holdings is now up 5% so far in 2022, handily beating the negative 18% return for the S&P 500.
There was no specific news from the company that caused the rally this past week. However, the fast-growing energy drink brand could become an acquisition target, at least according to some stock market analysts. A couple weeks ago, the suggestion was that beverage giant PepsiCo could be interested in purchasing Celsius.
This is of course just the rumor mill churning out juicy but totally unconfirmed gossip. However, it wouldn't be shocking if some drink or snack conglomerate would want Celsius. In a slow-and-steady industry, small but fast-growing Celsius stands out. In Q1 2022, revenue grew 166% year over year to $133 million.
The bar is relatively low for new and upstart brands to break into the food and beverage industry -- but building a big and successful business is difficult. Capturing consumer attention among a slew of competitors is a tall task, and getting product onto shelves by way of distribution deals is critical. (This latter point is where the Celsius acquisition rumor came from, since fellow energy drink company Bang said it was choosing a different distributor other than Pepsi, and that Pepsi might want to fill the void with Celsius.)
At any rate, Celsius has picked up momentum the last couple of years and could use that strength to keep its hot growth streak going. For a high-growth stock, it's notable that Celsius is also profitable. It generated net income of $6.7 million in Q1, and free cash flow of $8.4 million.
At this juncture, consider Celsius a high-risk, potentially high-reward investment. Sales through Amazon and Costco made up nearly 30% of total revenue in the first quarter, but if the company can continue to diversify distribution and find its way into more consumers' refrigerators, there could be plenty more growth left here.