Celsius Holdings (CELH) shares edged higher in premarket trading on Friday, recovering from a steep decline triggered by news that Texas regulators are investigating the company and its Alani Nu brand for potential deceptive marketing practices targeting teenagers and children. The stock was last quoted at $28.31, up about 2%, after closing at $27.75 on Thursday—a drop of 7.5%.
The investigation, announced by Texas Attorney General Ken Paxton, focuses on whether Celsius and Alani Nu violated the Texas Deceptive Trade Practices Act by misleading consumers about the safety of their energy drinks for young people. Paxton’s office highlighted the 200 milligrams of caffeine in each 12-ounce can of Alani Nu and criticized what it described as youth-oriented marketing and brightly colored packaging.
Alani Nu is a critical growth driver for Celsius, contributing $368.1 million to first-quarter sales, which totaled $782.6 million—a 138% year-over-year increase. The combined Celsius-Alani Nu-Rockstar portfolio now commands nearly 20.9% of the U.S. ready-to-drink energy market, putting it in direct competition with Monster Beverage and privately held Red Bull.
Despite the regulatory headwinds, several analysts remain bullish on Celsius. BofA’s Peter Galbo reiterated a Buy rating, noting that energy drinks often attract regulatory scrutiny but that past investigations have typically resulted in limited lasting impact. Morgan Stanley upgraded Celsius to Overweight from Equal Weight, setting a price target of $55, citing improved risk-reward as the stock trades near its 52-week low.
BNP Paribas analyst Kevin Grundy drew parallels to earlier caffeine-related probes of Monster Beverage, arguing that “very little ultimately came” from those cases and predicting a similar outcome here. However, the risks are palpable: if the Texas inquiry leads to changes in marketing or labeling, or if retailers pull back on promotions, Celsius could face rising legal costs and slower sales just as the summer season begins.
PepsiCo, which holds an approximately 11% stake in Celsius and has designated Celsius as the lead brand for its combined U.S. energy-drink portfolio, remains a key strategic partner. The partnership, which also includes Alani Nu and Rockstar, was designed to challenge Monster and Red Bull more effectively.
Celsius responded to the investigation by stating it will cooperate with Paxton’s office but disagrees with the characterization of its practices. The company emphasizes that its products list caffeine content and include warnings that the drinks are not intended for children.
While Friday’s premarket bounce offers some relief, the situation remains fluid. Investors are weighing whether the Texas probe will prove to be a temporary headline risk or a more significant threat to Alani Nu’s momentum. For now, the stock’s recovery reflects cautious optimism that the investigation will follow the pattern of past energy-drink cases—fading without major consequences.
