As of May 23, the S&P 500 is down just over 1% this year. That's not a great result thus far, but the broad benchmark has surged since early April thanks to a more positive tone from the investment community.
There's one stock that has performed substantially better as it's up 37% in 2025: Celsius Holdings (CELH 4.01%). This doesn't take away from the fact that shares are still 62% below their peak. Nonetheless, a huge gain this year can catch the attention of investors looking to put some money to work.
Should you buy this beverage stock like there's no tomorrow? There's a lot to think through, particularly on both sides of the argument, before answering that question.
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Challenging the dominant brands in the industry
By targeting health and wellness enthusiasts with its energy drinks that are made with natural ingredients, Celsius saw terrific growth in the past few years, with revenue catapulting 331% higher between 2021 and 2024. The market caught on to the company's sugar-free beverage options, something that the industry was neglecting to offer.
Nowadays, Celsius has the third-highest market share in the energy drink category. The company purchased Alani Nu for $1.8 billion to jump-start growth. Alani Nu not only brings in a female customer demographic, but the up-and-coming energy drink brand posted annualized sales growth of 50% between 2022 and 2024.
In 2022, the business struck a deal with PepsiCo. The soft drinks and snacks juggernaut handles domestic and international distribution for Celsius, helping get the energy drink into more retail locations. The plus side of this arrangement is that it can expand Celsius' presence overseas. To that end, the brand is now in Australia, Canada, France, Ireland, New Zealand, the U.K., Belgium, Luxembourg, and the Netherlands.
During the three-month period that ended March 31, international revenue jumped 41% year over year, a huge contrast to the 7% decline for the overall business. Given that revenue outside the U.S. only accounts for 7% of the total, there could be lots of untapped potential for Celsius around the world.
Crashing hard
Celsius' bear case also deserves some attention. One major red flag is the aforementioned 7% drop in revenue during the first quarter. This followed a decline in the last two quarters of 2024. Consequently, Celsius is losing market share. Red Bull and Monster Beverage are the two dominant forces in the industry. And it will be extremely difficult for Celsius to meaningfully eat away at their lead over the long term.
This points to a real concern around the company's competitive advantages, if it has any. There are numerous brands for consumers to choose from, no switching costs, and low barriers to entry. It's difficult to have confidence that Celsius possesses staying power. Alani Nu's rapid ascent points to how quickly newcomers can gain consumer interest. There will surely be new brands that enter the market in the future.
Speaking of Alani Nu, a valid argument can be made that Celsius' leadership team made the acquisition because they believed it would be challenging to maintain strong growth organically in the years ahead. Alani Nu's executives might be thinking the same thoughts. Why would they sell a thriving business with unbelievable growth at just three times sales? It makes you wonder if there are tough times ahead.
Celsius' business isn't firing on all cylinders right now. However, the valuation, in my view, still reflects a robust outlook ahead. Shares trade at a forward price-to-earnings (P/E) ratio of 40.2, which I think is steep. I believe the bear case is much more convincing, so investors should avoid the stock.
