It has been an interesting few days in the world of carbonated beverages and energy drinks. Recent reports around Bang terminating its exclusive distribution partnership with Pepsi (NASDAQ:PEP) have a number of analysts speculating that Pepsi will target Celsius (NASDAQ:CELH) or Monster (NASDAQ:MNST) for a buyout. Today, CELH stock has soared more than 13%. Meanwhile, Monster is up over 1%.
Speculation is always fun. And while analysts are the smart guys in the room, it’s unclear to what extent these rumors hold water. However, for investors in CELH stock, the rumor appears to be just another reason to own shares.
Celsius was a pandemic winner — and it hasn’t given up much of its gains this year, unlike other pandemic darlings. That’s because Celsius is a fast-growing brand. It could continue to take market share in this lucrative space.
For those intrigued by the potential consolidation in this sector, let’s dive into what’s driving today’s rumors.
Could Pepsi Take CELH Stock on a Nice Ride?
The termination of Pepsi’s exclusive distribution agreement with Bang is certainly a catalyst for these rumors. After all, it involved some pretty messy proceedings. Bang sued Pepsi for effectively enforcing its exclusive agreement. Ultimately, Bang came up short, though it did end up officially terminating its agreement today.
With Bang out of the picture, Pepsi is likely to seek another suitor. And, given the headaches with this past relationship, it makes sense that analysts would speculate a buyout will be easier for the company.
That said, CELH stock isn’t cheap. The company currently trades at well over 400 times earnings. For shareholders, applying a premium to this already high multiple may not be in Pepsi’s best interest.
Of course, we’ll have to see what happens. I’m intrigued by the recent speculation because there’s often fire where there’s smoke. Pepsi may certainly be thinking about a deal. But whether the company will be able to work a Celsius buyout within its M&A models remains to be seen. Investors should be cautious about the rumors for now.
On the date of publication, Chris MacDonald did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
