What happened

Shares of energy-drink maker Celsius Holdings (CELH 0.58%) are spiking nearly 30% this week, according to data provided by S&P Global Market Intelligence. The massive move brought the stock to an all-time high.

So what

Record first-quarter revenue nearly doubled versus the prior-year period. The results seem to verify that a distribution partnership with PepsiCo, which was announced last year, is paying dividends. Management attributed improved brand awareness and product availability to that new agreement with the snack and drink maker.

Approximately 95% of Celsius’ sales come from North America. CEO John Fieldly said the United States is the key growth driver for the company, noting that Celsius is now the “established #3 Energy Drink Brand in the category.” He added that market share has doubled from a year ago to about 7.5%.

Image source: Getty Images.

Now what

Celsius has had to overcome some headwinds recently. Two separate, high-profile lawsuits were settled earlier this year.

One was a class action suit filed last year that claimed the company’s products had misleading labels saying the drinks contained “no preservatives” when they contained citric acid. The company settled the suit but denied the allegation, saying the citric acid was used as a flavoring, not as a preservative.

The company also lost a well-publicized breach-of-contract lawsuit brought by hip-hop artist Flo Rida. The entertainer and former company spokesman was awarded nearly $83 million but also continued to publicly support the Celsius product.

With those lawsuits behind it, Celsius is now focusing on growing its business. The PepsiCo partnership is clearly driving that growth quickly.

The company is valued at more than $10 billion, however, which is a hefty 15 times 2022 sales. Even if revenue doubles this year, the valuation remains quite high. But the solid results probably warrant putting Celsius Holdings on your watch list to wait for a better valuation.

Howard Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Celsius. The Motley Fool has a disclosure policy.

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