Amended Pepsi distribution agreement negative for Celsius shares, says Stifel

Stifel notes that Celsius (CELH) disclosed an amended distribution agreement with PepsiCo (PEP) to include an incentive program meant to incentivize and compensate Pepsi for selling Celsius products. While unclear exactly what this means given most of the filing is redacted for competitive reasons, the agreement increases Pepsi’s average targeted margin, which the firm thinks will reduce Celsius’ margin by a similar amount, says the analyst, who also thinks the amended agreement likely includes some advantages for Celsius that could help offset potential margin pressure. However, from a stock standpoint, the firm views the amended distribution agreement as “negative for CELH shares given the likely reduction in profitability,” even if potentially limited, and related uncertainty. The firm, which notes that it attributes the amendment in part to Celsius’ ongoing strong sales growth and share gains, keeps a Buy rating and $95 price target on Celsius shares.