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Monster Beverage Corp MNST Stock Quote

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Morningstar‘s Stock Analysis MNST

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Is it the right time to buy or sell?

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Monster’s Profitability Remains Challenged by High Input Costs, but Long-term Outlook Is Intact

Zain Akbari, CFA Equity Analyst

Analyst Note

| Zain Akbari, CFA |

Similar to the after-hours trading price reaction, our $86 per share valuation of narrow-moat Monster Beverage should slide by a mid-single-digit percentage in the wake of its disappointing second-quarter earnings announcement. The company came under greater profitability strain that we expected, and its first-half gross margin swoon (down more than 800 basis points to 49%) suggests our estimate of a nearly 4-point full-year shortfall is overly optimistic, despite our view that conditions should improve in the second half. However, the margin pressure stems from supply chain challenges and widespread inflationary pressures that we expect to abate over time, and so we still forecast mid- to high-single-digit percentage annual sales growth and mid-30s operating margins over the long term. We suggest prospective investors await a more attractive entry point.

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Key Statistics MNST

Company Profile MNST

Business Description

Monster Beverage is a leader in the energy drink subsegment of the beverage industry. The Monster trademark anchors the portfolio, and notable offerings include Monster Energy and Monster Ultra. The firm has also started to incubate new trademarks for emerging enclaves of the energy space, like Reign in performance energy. It is primarily a brand owner, outsourcing Most of its manufacturing processes to third-party copackers. It primarily uses the Coca-Cola bottling system for distribution after a strategic agreement in which Coke became Monster’s largest shareholder (nearly 20%) and that also included the exchange of certain businesses between the two firms. Most of Monster’s revenue is generated in the United States, though international geographies are increasing in the mix.

1 Monster Way
Corona, CA, 92879
T +1 951 739-6200
Industry Beverages - Non-Alcoholic
Most Recent Earnings Jun 30, 2022
Fiscal Year End Dec 31, 2022
Stock Type Aggressive Growth
Employees 4,092

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