Shares of Celsius Holdings (CELH +2.04%), the beaten-down maker of energy drinks, were moving higher this week, even though there was no company-specific news.
Instead, Celsius stock seemed to respond positively to news that PepsiCo (PEP +0.64%), which owns a minority stake in Celsius, is buying Poppi, a maker of prebiotic sodas, for $1.95 billion, which includes $300 million of tax benefits.
That news sparked a rally in beverage stocks, sending Celsius higher as it seemed to signal that big beverage companies were willing to open up their wallets to make acquisitions.
The stock was up 14.8% for the week as of 12:48 p.m. ET on Thursday.
Image source: Celsius Holdings.
Acquisition deals are popping up
Celsius stock jumped more than 10% on Monday after the news of the PepsiCo-Poppi deal came out. But not every analyst though it was a bullish signal for Celsius, which is trading down more than 70% from its peak as sales have slowed and PepsiCo overstocked Celsius inventory after becoming its distribution partner.
Jefferies weighed in on the move, saying it makes a buyout of Celsius by Pepsi less likely, as Pepsi is presumedly pivoting away from Celsius with its move into the newer healthy-beverage category.
NASDAQ: CELH
Key Data Points
Nonetheless, investors seemed encouraged by the move and sent the stock up further on Wednesday after Fed chairman Jerome Powell was generally constructive on the state of the economy, saying that hard data doesn't signal weakness, a good sign for consumer discretionary brands like Celsius.
Can Celsius keep climbing?
Celsius is also fresh off its own acquisition after saying it would take over nutritional supplement maker Alani Nu for $1.8 billion last month.
The company seems to be at a crossroads. Its blistering growth of earlier has faded as it has faced new competition in sugar-free drinks from Red Bull and Monster Beverage and as the energy drink market seems to be maturing.
At this point, the beverage stock's valuation looks much more reasonable, trading at a forward price-to-earnings ratio around 30. If the slowdown in growth proves to be temporary, the stock could move significantly higher from here.
