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Monster’s Potential is Becoming Reality

Stock (Symbol)

Monster Beverage (MNST)

Stock Price

$162

Sector
Food & Necessities
Data is as of
July 14, 2016
Expected to Report
Aug 4 – Aug 8
Company Description
monster_unleashMonster Beverage Corporation is a holding company. The Company develop, market, sell and distribute alternative beverage category beverages under the brand names of Monster Energy, Monster Rehab, Monster Energy Extra Strength Nitrous Technology, Java Monster, X-Presso Monster, Muscle Monster, Punch Monster, Hansen’s, Hansen’s Natural Cane Soda, Junior Juice, Blue Sky, Hubert’s, Worx Energy and Peace Tea. The company has two segments, Direct Store Delivery (DSD), whose principal products comprise energy drinks, and Warehouse (Warehouse), whose principal products comprise juice-based and soda beverages. The DSD segment develops, markets and sells products primarily through an exclusive distributor network, whereas the Warehouse segment develops, markets and sells products primarily direct to retailers.
Sharek’s Take
David SharekMonster Beverage’s (MNST) vast potential is becoming a reality — and the stock has surged as a result. Last qtr the energy drink company had $680 million in revenue, blowing past analyst estimates of $657 million, and up 16% year-over-year. Sales outside the U.S. jumped 31% to $149 million from $113 million in the year-ago period as its distribution deal with Coca-Cola started to take effect. In June 2015 Coca-Cola bought a 17% stake in Monster, got all Monster’s non-energy drinks, with the arrangement that Coke would handle all Monster’s International distributing. MNST also got all Coke’s energy drinks. Monster had gotten only 1/4 of its sales abroad, and now the opportunity is vast. This deal also gave MNST a ton of cash to use for acquisitions and stock buybacks. Management just issued a $2 billion share buyback program and acquired its principal flavor supplier American Fruits and Flavors, getting ownership and intellectual property. Monster is working with Coke’s Hellenic Bottling Company, and has expanded into more than half of 28 new countries so far. It launched in Australia and New Zealand this past May with Russia and China — the #1 energy drink market in the world — also set for 2016. The company is also developing specialized drinks for certain lifestyles, like NASCAR or Burning man crowds. Investors have recently taken notice and sent the shares from $120 to $160. Now with a P/E of 41 MNST is a little high, but I wouldn’t be a seller.
One Year Chart
MNST_2016_Q2Two qtrs ago sales were hurt by a pre-announced price increase that had customers load-up on products as well as by distributors who were pissed they were being phased out. Well the company made up for it last qtr with 29% profit growth, surpassing the 19% estimate. After a qtr like that I expected estimates to get upped, but they didn’t increase much. Still, profit Estimates for the next 4 qtrs are 30%, 29%, 43% and 29%. I feel the Est. LTG is low and believe the company will grow faster than that.
Fair Value
MNST_2016_Q2_PHMNST has shot up so much it’s above my 2016 Fair Value. Still, I wouldn’t sell because this run-up could be a sign of bigger and better things to come.
Bottom Line
MNST_2016_Q2_10yrMonster Beverage has tons of growth opportunity overseas. In addition, Monster is the expert at introducing new energy drinks and gains immediate traction via marketing which includes going to special events and passing out the new drinks. The company also has a catalyst in concentrate sales, which were nothing a year ago. Yes, MNST is high right now with a P/E of 41, but I wouldn’t be a seller here as we could be in for a great year ahead. MNST ranks 7th in the Growth Portfolio Power Rankings and 8th in the Aggressive Growth Power Rankings
Power Rankings
Growth Stock Portfolio

7 of 38

Aggressive Growth Portfolio

8 of 16

Conservative Stock Portfolio

N/A

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