Celsius Holdings (NASDAQ:CELH) experienced a sharp rebound on Friday, climbing 11.9% to $26.60 by 14:05 EDT, following news that Rockstar Energy co-founder Russ Savage has proposed taking over as chief executive. The surge recovered approximately 52.5% of the $1.36 billion in market value that was erased on Thursday after the company reported disappointing second-quarter earnings.
The stock's recovery, which added about $716 million in market capitalization, came as investors reacted to the potential for a leadership change rather than a fundamental turnaround. Despite the bounce, shares remained 8.8% below Wednesday's closing price, underscoring lingering concerns about the company's core business.
Leadership Challenge and Market Reaction
Russ Savage, who sold Rockstar to PepsiCo (NASDAQ:PEP) in 2020 for $3.85 billion, told CNBC that he holds over 12 million Celsius shares, representing a 4.7% stake valued at no less than $319 million based on Friday's market price. His proposal to take over as CEO has been met with a cautious response from the company.
A Celsius spokesperson stated, "Members of our board and management team have engaged with Russ Savage many times over the past several years," according to Reuters. The company did not indicate any immediate plans to accede to Savage's request.
Q2 Earnings Highlight Core Brand Weakness
The earnings report released Thursday revealed a mixed picture. Total revenue increased 10.6% to $817.9 million, driven by the Alani Nu and Rockstar acquisitions, but adjusted EBITDA declined 12% to $184.2 million. Adjusted earnings per share came in at $0.36, missing the FactSet consensus of $0.42.
Gross margin contracted by 340 basis points to 48.1%, pressured by promotional activity, channel mix shifts, and rising aluminum costs. Net income fell 45% to $55.3 million, while adjusted diluted EPS dropped 23% to $0.36.
Most concerning was the performance of the flagship Celsius brand. Revenue from the core Celsius line declined 11.7%, while Alani Nu contributed $364.4 million, representing 44.6% of total group sales. The company reduced Celsius distribution points by approximately 7%, though revenue per continuing distribution point rose 16% year-over-year.
Analyst Reactions and Price Target Cuts
Wall Street reacted swiftly, with nine firms trimming price targets on Friday by an average of 22.3%. The mean target fell to $41.00 from $52.78. While most analysts maintained Buy or Overweight ratings, Bernstein cut its rating to Market Perform with a $26 target, and Maxim Group downgraded to Hold.
Needham's senior analyst Gerald Pascarelli reiterated a Buy rating, describing the quarter as a "very tough quarter" but expressing optimism that "better days lie ahead." Bernstein, however, stated there was no apparent route to a turnaround for the main brand.
Market Context and Outlook
Trading volume on Friday reached 24.1 million shares, more than double the 65-day average of 10.1 million, indicating significant investor interest driven by company-specific news.
CEO John Fieldly emphasized that the combined portfolio accounts for "roughly one in five energy drinks sold in the United States," and expressed a commitment to achieving sustainable growth for the core brand. The company allocated $100.4 million toward share buybacks in the second quarter.
The broader market context shows Celsius facing intense competition from Monster Beverage (NASDAQ:MNST), whose shares fell 4.5% on Friday, while PepsiCo rose 0.3%. The S&P 500 gained 0.4%.
Risks and Considerations
Several risks remain, including the possibility that the core brand's contraction may persist beyond the assortment reset. Margins may continue to face pressure from aluminum prices and promotional activity. Additionally, leadership disputes could hinder the integration of Alani Nu and Rockstar.
For Friday's governance premium to be sustainable, core Celsius sales will need to resume growth. Investors are watching closely to see whether Savage's proposal leads to meaningful change or remains a distraction.
