Monster Beverage (MNST)
By Timothy Lutts, Chief Analyst, Cabot Stock of the Month
From Cabot Wealth Advisory 5/16/16 Sign up for Cabot Wealth Advisory—it’s free!
Monster Beverage (MNST) was previously known as Hansen Natural, and was a great growth stock from 2008 to 2012. But then it changed its name to Monster—in recognition of its best-selling energy drinks—and investors rewarded it with a nasty 50% “correction.”
The stock wasn’t done though; it got back on track. And investors who had held the stock all the way from 2008 to the middle of 2015 notched a gain of roughly 1,400%!
At which point management announced a huge deal with Coca-Cola, which gave Monster Coke’s energy drink portfolio, gave Coke Monster’s non-energy drink portfolio, gave Coke 17% ownership of Monster, and (most importantly) gave Monster access to Coke’s awesome distribution network!
And what did the stock do on that news? It soared!
MNST rose 30% in a single day on more than 10 times its average volume. And it kept chugging higher from there, rallying another 50% over the next six months. This, by the way, provides a good lesson on why super-powerful moves (like extreme earnings gaps) can often provide good buying opportunities—it's a sign of a sudden change in perception, and if the news is bullish enough, it often results in months worth of follow-on buying.
However, MNST hasn't done much of anything since that move concluded back in February 2015, stuck in a trading range between 120 and 150.
But the stock had a very impressive reaction to its latest earning report. Add to that the fact that the energy drink market is still growing (as opposed to the mature alcoholic beverage market), and I think the odds are good that MNST is shaping up for another big run.
In fact, the stock just earned a spot on Mike Cintolo’s Watch List in Cabot Growth Investor. Here’s a piece of what Mike wrote:
“MNST traded sideways from February 2015 through April 2016, but it caught a strong updraft after its late-April earnings report, gapping up from 128 to 144 in one day and sailing to 153 in the days following. Sales growth hasn’t been huge—just 9% in Q1—but investors are finding a lot of potential in the story and the steady improvement in fundamentals (including strong earnings estimates) and the $2 billion share buyback announced during the earnings call. This story could have legs.”
So, you could just buy MNST here and take your chances going it alone. But a wiser course is to sign up for Mike’s regular weekly updates, so you’ll know exactly when to buy, and when to sell.
By Michael Cintolo, Chief Analyst, Cabot Growth Investor and Cabot Top Ten Trader
From Cabot Wealth Advisory 5/5/16 Sign up for Cabot Wealth Advisory—it’s free!
One stock that just popped back on my radar screen is Monster Beverage (MNST). Here’s some of what I wrote about the stock recently in Cabot Top Ten Trader:
“Monster Beverage is starting to reap the rewards of a 2015 deal with the world’s largest soft drink company. Coca-Cola bought a 16.7% stake in Monster for a cool $2.15 billion in cash two years ago, and thus began to give Monster access to Coca-Cola’s vaunted distribution network. Monster’s sales were already consistently in the high-single-digit and low-double-digit range prior to the Coca-Cola deal, and most investors except that to accelerate slightly going forward. The company announced a $2 billion share repurchase program during its first-quarter earnings call last week and the results were strong too—sales and EPS were well above analyst estimates, as Monster’s expanding international distribution reach offset continued strength in the U.S. dollar. The company is about to spread its wings even further; thanks to its Coca-Cola agreement, Monster Energy drinks will hit shelves in Australia and New Zealand later this month. With analysts expecting earnings to rise 32% this year and another 20% in 2017, the potential here is big.”
After a long 14-month rest period, I think MNST has good potential going forward, though it could use a proper setup. For my up-to-date advice on how to handle MNST and other leading stocks, you should subscribe to my Cabot Top Ten Trader—there’s no risk to you, and as this bull market continues, you’ll be able to land many big winners. Click here for details.
From Cabot Wealth Advisory 2/24/14 Sign up for Cabot Wealth Advisory—it's free.
My stock pick today is a company that has done a great job of re-inventing itself, writing a new chapter in its story after a very successful first run. The company now calls itself Monster Beverage (MNST), but when it first started showing up in screens for Cabot Top Ten Trader, it called itself Hansen Natural. Hansen was a squeaky clean bottler of organic juices with a unicorn-in-the-orchard vibe about it.
What most consumers didn’t know was that Hansen’s huge revenue growth was due mostly to its lineup of energy drinks that were marketed with high-energy graphics to thrill-seeking punks and shredders who didn’t give a rip about sunshine and lollipop juice drinks.
It’s a good story about reinvention, and here’s what Mike Cintolo, chief analyst at Cabot Top Ten Trader wrote about it in the February 17 issue. This writeup follows the traditional Top Ten pattern of a paragraph about why the stock is strong and another about how the stock looks from a technical point of view.
Why the Strength
“Back when Hansen Natural was scoring its 21 appearances in Cabot Top Ten Trader from 2004 through 2011, the company had a guilty little secret. While its public face was based on organic fruit drinks, the company also owned the hugely profitable Monster energy drink brand, which was the source of its most vigorous growth. The charade ended in 2012 when the company changed its name to Monster Beverage, acknowledging where the growth really lay. Now, with various energy brands thriving, the company is enjoying healthy growth. And it still has the Hansen Natural and other organic brands under its umbrella. The company has been enjoying steady, but uninspiring revenue growth, but investors have other reasons to be enthusiastic. The rumor mill has been cranking out speculation that Coca-Cola might want to take over Monster and its wildly popular energy drink lineup. There is also speculation that the company might strike a deal with Green Mountain Coffee Roasters to offer its products in Green Mountain’s new Keurig Cold beverage system (as Coca-Cola has already done). Plus, the company’s announcement of a new product called Punch Monster, which is intended to keep partygoers awake all night, shows continuing product innovation. No date for Monster’s Q4 and 2013 earnings report has been announced, but its Q3 report was on November 7, so it’s likely to come in February.
“MNST was featured three times in Top Ten in 2012, but after its June 11 appearance, the stock went into a tailspin that pulled it from 75 to 40 in October. The stock worked its way back to 66 last June, but corrected to 51 in early October 2013. But since then, buoyed by solid fundamentals and the persistent takeover rumors, MNST has been on a roll, with a nice pop on February 10 and 11 pushing it to new multi-year highs. MNST has pulled back a couple of points from last week’s highs, and looks like a reasonable buy anywhere under 71. Use a stop near 64 until earnings are safely in place.”
You can find additional stocks with high growth potential featured in Cabot Top Ten Trader each week by clicking here.
|Monster Beverage (MNST)
550 Monica Circle, Suite 201
Corona, California 92880
|Index Membership: Nasdaq 100
Sector: Consumer Goods
Industry: Beverages - Soft Drinks
Full Time Employees: 1,214
5/5/16 Monster (MNST): Reaping rewards of Coca-Cola deal
2/24/14 Monster Beverage (MNST): Great job of reinventing itself