Monster Beverage's International Growth May Not Be Enough To Offset US Slowdown
Monster Beverage Corp’s (NASDAQ: MNST) risk-reward seems unfavorable due to the slowdown in US trends, emerging global competition and the company’s increasing dependence on lower margin international growth, according to UBS.
The Analyst
UBS analyst Sean King maintained a Sell rating on Monster Beverage, while raising the price target from $52 to $53.
The Thesis
Monster Beverage reported third-quarter earnings of 55 cents per share, beating the consensus expectation of 52 cents. The earnings beat was driven by solid growth in international sales, which came in at 34.2%, versus Street expectations of 22.5%, King said in the note.
He added, however, that the company’s sales growth in the US was disappointing and the trends suggest negative underlying volume growth.
Although Monster Beverage’s international growth so far this quarter has remained strong, it is low margin. The analyst added that the company faces several difficulties in the US, including pricing laps beginning in the fourth quarter of 2019 and Reign pipeline fill starting in the first quarter of 2020.
If US sales growth turns flat to negative, Monster Beverage would need to generate around 30% to 35% international growth to meet the consensus expectations of 9%-10% total sales growth, King said. He further wrote, “In that scenario, international margins also would require a marked improvement to meet consensus earnings expectations.”
Price Action
Shares of Monster Beverage were up 3.64% to $58.70 at the time of publishing on Friday.
Photo courtesy of Kojima Productions on Twitter. Monster Energy is featured in their new game "Death Stranding."
Latest Ratings for MNST
Nov 2019 | Maintains | Equal-Weight | ||
Nov 2019 | Maintains | Sell | ||
Oct 2019 | Downgrades | Outperform | Market Perform |
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