CELH Stock Dips Most In 3 Months On Teen Death Probe: Two Analysts Still See 98% Upside

• Bank of America said regulatory scrutiny of energy drinks is not unusual and maintained its ‘Buy’ rating on Celsius.
• Morgan Stanley upgraded Celsius to Overweight, citing an attractive valuation near 52-week lows. 
• Texas Attorney General Ken Paxton is investigating Celsius and Alani Nu over claims that they misled consumers about the safety of energy drinks. 

Celsius Holdings (CELH) has received Wall Street’s endorsement even as Texas regulators opened an investigation into marketing practices tied to the company’s Alani Nu energy drink brand. 

The probe led to a selloff on Thursday, with Celsius stock recording its biggest single-day drop in three months. 

Analysts’ Back CELH’s Long-Term Growth 

Analyst Peter Galbo of Bank of America noted that energy drink makers have periodically drawn scrutiny from regulators and public health groups, but the firm maintains a ‘Buy’ rating on the stock with a $55 price target, implying 98% upside to the stock’s closing price on Thursday. 

Morgan Stanley upgraded Celsius to ‘Overweight’ from ‘Equal Weight’ and also set a $55 price target, according to Investing.com. The firm noted that the shares are trading near their lowest level in the past year and added that the valuation presents a compelling opportunity for investors.

According to analyst Eric Serotta, overall energy drink sales tied to Celsius brands, including Celsius, Alani Nu and Rockstar, continued to expand during the two weeks ended May 16. Celsius brand sales and market share edged lower, though the new Electric Vibe launch gained traction despite limited availability. Overall category share also slipped slightly. 

Alani Nu continued to perform strongly, with sales growing more than 50% over the latest two-week period. The analyst said this strong momentum was a key reason behind Morgan Stanley’s bullish view on the stock. 

BNP Paribas analyst Kevin Grundy has said the Celsius investigation is unlikely to materially affect the energy drink company's story, arguing that it may generate headline risk and make parents more aware of their children's energy drink habits. But the energy drink industry has faced legal scrutiny over its caffeine content in the past and emerged relatively unscathed, he added.

CELH’s Legal Trouble 

On Thursday, Texas Attorney General Ken Paxton launched an investigation into Celsius and its Alani Nu brand over whether they misled consumers about the safety of their energy drinks.

The probe will examine whether the company violated Texas consumer protection laws by marketing the drinks as safe for teens and children. The investigation follows a lawsuit from the family of a 17-year-old Texas cheerleader who allegedly died from a heart condition linked to excessive caffeine consumption and claimed the product lacked sufficient warnings.

What CELH Retail Traders Are Saying 

On Stocktwits, retail sentiment around the stock jumped to ‘bullish’ from ‘bearish,’ with a 564% jump in message volume in 24 hours. 

A user said, “$100 in CELH ten years ago is worth $3,448 today. At $28.28, you’re getting in cheaper than the people who already turned every hundred into three thousand. This stock was $80. It was $60. Now it’s under $30. Not because the company is dying, but because the market forgot what a compounder looks like when it goes on sale.” 

Another user added to optimism, saying, “Added more at $27.75! Same people selling at these levels will be the same chasing at $75. Same thing happened with AMD and I was loading up in the $70’s and now making 6 figures! This will do the same for me!”

CELH stock has declined by over 39% year-to-date. 

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