Analysts Bullish on Monster After Investor Day
2022.06.15 19:22
Analysts Bullish on Monster (MNST) After Investor Day
By Sam Boughedda
Monster Beverage (NASDAQ:MNST) hosted its virtual Annual Shareholder Meeting on Tuesday afternoon.
The company said it is not seeing much change in consumer behavior at this point, with no major change to US trends. However, there was some weakness in Europe in April, although it has improved since.
In addition, management said it “understands” Red Bull is taking 7% pricing and “probably” around the same time as Monster.
Further, the company announced a $500 million share repurchase plan.
Here is how Wall Street analysts saw yesterday’s Investor Day
Nik Modi, an analyst at RBC Capital, said: “MNST provided its typical Nielsen scanner data update. All channel Y/Y $ sales growth for the 13 weeks ended 5/28: Total energy drink category +9.2%, total Monster +7.4%, brand Monster +9.1%, Reign -6.2%, NOS -3.1%, Full Throttle +4.1%. Monster sales growth exceeded Red Bull over the last 13 weeks.”
JPMorgan analyst Andrea Teixeira told investors in a note that they “thought the tone of the meeting was largely constructive.”
“We think current valuation (27.6x our 2023 EPS) largely balances the bull (stronger sales growth, faster margin recovery with pricing actions and abating cost pressures, share repurchases) and bear cases (elasticity/macro concerns, still ongoing cost pressures, category fragmentation). Below we highlight our key takeaways from the meeting,” added Teixeira.
Meanwhile, Evercore ISI analyst Robert Ottenstein said: “Management ‘understands’ Red Bull is taking 7% pricing and ‘probably’ around the same time as Monster in the US but we take some pause given recent conservations with senior industry executives who have yet to see any definitive actions. Other key takeaways include that Monster is taking price in Europe and its color around new innovation across categories, including leveraging alcohol with CANarchy.”
And finally, Kaumil Gajrawala, an analyst at Credit Suisse said the firm’s current $111 target price and Outperform rating are based on 31x its 2025 EPS estimate of $4.49 discounted at 8%.
“Our target multiple reflects Monster’s high-return-on-capital business and our expectation for above-consensus top-line and EPS growth over the next few years. MNST has traded at a five-year average multiple of 31x forward earnings (range of 28-34x within one standard deviation). Risk: Risks to our Outperform rating and $111 target price include increasing competitive intensity in the U.S. energy drinks market, shifting consumer tastes and proliferation of alternative functional beverages, and Monster’s ability to gain further share overseas while keeping costs down.”
