The tide may be turning for Celsius Holdings (CELH -4.47%). The sugar-free energy drink brand saw its stock jump 40% in the days following its fourth-quarter earnings report and announcement of the blockbuster acquisition of competitor Alani Nu.

Management is aggressively positioning itself as the leader in sugar-free energy drinks and the third pillar along with Monster Beverage and Red Bull in energy drinks globally. Combined, Celsius and Alani Nu will do around $2 billion in annual revenue and could close in on 20% market share in the United States if they keep making inroads versus the competition.

Investors applauded Celsius's bounce-back earnings and the Alani Nu deal. Does that make the stock a buy for investors after this pop?

Combining with Alani Nu

Celsius stock went into a tailspin in 2024 and the start of 2025, dropping 75% from all-time highs. At first, investors were concerned about overstocking with its largest distributor, PepsiCo, that led to a huge slowdown in revenue growth. Then, fears started to pop up over major market share gains from the newer Alani Nu brand at the expense of its own sugar-free brand.

Well, it looks like management decided to solve this problem by buying Alani Nu for itself. The deal values Alani Nu at $1.8 billion -- $1.65 billion if you offset the value of tax credits -- compared to $595 million in annual revenue and $173 million in interest, taxes, depreciation, and amortization (EBITDA). A price tag of $1.65 billion divided by $173 million is just 9.5x Alani Nu's 2024 EBITDA, which is not a demanding multiple.

Investors likely saw this EBITDA multiple as attractive, especially considering how fast Alani Nu is growing, which is why Celsius stock shot up on the news. Its own earnings were not exciting, posting a revenue decline of 4% and no concrete 2025 guidance. The stock is likely up mainly because of this attractive deal with Alani Nu.

Betting on international expansion

In the coming years, Celsius is hoping to expand internationally with both the Celsius brand and now Alani Nu under its umbrella. International revenue grew 39% year over year in the fourth quarter but still makes up a tiny portion of overall sales. The company has established distribution deals in major markets such as Australia and the United Kingdom and hopes to gain more market share with its fitness and lifestyle-focused branding.

Can investors be confident this global expansion will succeed? I think so. Monster Beverage has successfully expanded outside the United States, driving growth for the $90 billion global energy drink market. People in other countries are likely looking for sugar-free energy drinks with a focus on health and fitness, just like they are in the United States. Celsius and Alani Nu have tens of millions of potential customers to target in new countries around the globe. It is not guaranteed to succeed, but Celsius seems to be at the very early stages of a major international expansion.

CELH Operating Margin (TTM) data by YCharts

Should you buy Celsius stock?

After its stock pop, Celsius Holdings now has a market cap of $7.67 billion. The Alani Nu deal will be financed with cash on hand, adding $900 million in debt to the balance sheet, and issuing 22.5 million shares of Celsius stock to Alani Nu owners. I wouldn't worry about the debt with the combined cash flow these brands will generate, but investors do need to account for the debt and dilution that comes along with this deal.

Without being precise, let's say the combination of debt and dilution will bring Celsius' enterprise value (market cap adding back net debt) up to around $9 billion at today's stock price. Combined, the company should do more than $2 billion in revenue in 2025. While consolidated profit margins will not be very high for a few years as the company integrates Alani Nu and invests for international growth, there is no reason the brands can't reach the same profit margin as Monster Beverage at maturity. The large competitor posted a 26.3% operating margin over the last 12 months.

On $2 billion in revenue, a 26.3% operating margin is $526 million in earnings, or around 17 times the look-through enterprise value estimate of $9 billion. This says Celsius stock is potentially undervalued if you are a believer in the margin expansion story. Combined, Celsius and Alani Nu should grow revenue at a double-digit rate through international expansion, potential market share gains, and the general growth of the energy drink category.

Despite the stock's pop, Celsius looks like a compelling buy for investors who believe in the continued growth of the Alani Nu and Celsius brands.