Celsius drops 6% as Texas AG probes Alani Nu marketing tactics

Texas Attorney General Ken Paxton's inquiry into Alani Nu's youth-focused marketing pushed Celsius Holdings shares to the brink of a 52-week low.

Celsius Holdings shares plunged more than 6% to $27.72 on Thursday after Texas Attorney General Ken Paxton disclosed a state-level investigation into Alani Nu's marketing practices that may target underage consumers.

"The inquiry will examine whether Alani Nu's vibrant packaging and youth-focused branding violate the Texas Deceptive Trade Practices Act by directly appealing to minors," Paxton's office said. Each Alani Nu can contains roughly 200 milligrams of caffeine, the office noted.

The stock closed at $27.72, just above its 52-week low of $27.66, with a market capitalization of $7.09 billion. Despite the regulatory headwind, BofA Securities analyst Peter Galbo reaffirmed a Buy rating with a $55 price target, while Morgan Stanley upgraded CELH to Overweight from Equal Weight, also setting a $55 objective. Analyst Eric Serotta cited an appealing risk-reward dynamic at current valuations.

The investigation introduces regulatory uncertainty for Celsius Holdings, which owns the Alani Nu brand alongside its namesake energy drink. Celsius brand revenue declined 3.6% in the latest two-week measurement period, while Alani Nu revenue surged 51%, highlighting the brand's importance to the company's growth. The stock has fallen roughly 30% over the past six months.

Alani Nu Drives Growth as Celsius Brand Slows

Comprehensive Celsius category revenue — encompassing the Celsius, Alani Nu and Rockstar brands — expanded 13.4% during the two weeks ending May 16, roughly matching the 13.7% growth in the prior period, according to Morgan Stanley. Dollar market share for the consolidated entity declined 30 basis points to 18.9%.

Alani Nu revenue accelerated to 51% growth in the most recent two-week interval, climbing from 49% in the prior measurement. The final week achieved 55% expansion as the brand completed lapping a Costco promotional campaign. Morgan Stanley expects scanner data to remain volatile near-term due to more challenging comparisons but projects Celsius brand growth should strengthen during summer with broader shelf placement.

Wall Street Upgrades Celsius as Regulatory Risk Weighs on Shares

Celsius delivered strong first-quarter results that exceeded analyst expectations. Earnings per share came in at $0.41, surpassing the $0.30 consensus, while revenue reached $783 million, above the $763 million projection. UBS maintained a Buy rating with a $55 price target, citing sustained growth in household penetration and purchase frequency.

The PepsiCo distribution partnership, approaching its fourth anniversary, remains fundamental to the company's distribution capabilities. A recently introduced limited-edition product, Electric Vibe, captured roughly 30 basis points of category market share, though availability remains constrained.

Congressional scrutiny of caffeine levels in energy beverages is not unprecedented. The sector has so far avoided comprehensive regulatory intervention, though the Texas inquiry adds a new challenge for Celsius specifically. If the investigation leads to formal charges, the company could face fines, operational restrictions or reputational damage that would pressure its ability to compete in the fast-growing energy drink market.

This article is for informational purposes only and does not constitute investment advice.