Monster Beverage Corporation MNST shares have lost 8.3% in the past three months. This decline is a contrast to the Zacks Beverages - Soft drinks industry and the S&P 500 index’s growth of 1.8% and 3.6%, respectively. MNST stock has also underperformed the Zacks Consumer Staples sector’s decline of 2.2%.
MNST Stock's Past Three Months' Performance
Zacks Investment Research
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As MNST is trading near its 52-week low of $43.32, investors are left wondering: Is it time to buy the dip or wait for further clarity? At the current price of $49.25, the MNST stock trades at a 19.6% discount to its 52-week high of $61.23. MNST trades below its 50- and 200-day moving averages, indicating a bearish sentiment.
MNST Stock Trades Below 50 & 200-Day SMAs
Zacks Investment Research
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Challenges Impacting Monster Beverage Stock
Monster Beverage is facing multiple challenges hurting its financial performance and growth outlook. The U.S. convenience channel has seen a slowdown in energy drink sales due to a tighter consumer spending environment, particularly affecting certain income groups and leading to weaker overall demand.
Fluctuating foreign exchange rates have further complicated profitability in international markets. Monster Beverage also ended the third quarter with significantly lower cash and cash equivalents compared to the end of 2023, reflecting a decline in liquidity. Furthermore, the company now carries long-term debt. In contrast, it had none at the end of the previous year, raising concerns about its reliance on external financing and potential adjustments to its capital allocation strategy.
The company’s rising operating expenses have pressured margins, increasing by 9.9% year over year in the third quarter of 2024. The rise in the expenses was driven by higher costs related to sponsorships, endorsements, payroll and intellectual property, including a $16.7 million provision and $1.2 million in legal expenses.
MNST’s Premium Valuation: A Concern for Investors
Despite the recent decline, Monster Beverage commands a high valuation, reflecting its strong market positioning, brand power and long-term growth potential compared with other non-alcoholic beverage companies. We believe that the stock is overvalued at current levels.
MNST trades at a significant premium to industry peers with a forward 12-month price-to-earnings (P/E) multiple of 26.42x. The current valuation is below its five-year median of 31.87x and has surpassed the broader industry’s multiple of 18.25x.
Zacks Investment Research
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The company’s ability to deliver on its promise of offering something for everyone to drink, with a focus on innovation and digital expansion, is crucial. While success in these areas could further strengthen its market leadership, failure could pose serious challenges for this energy drink giant. At this moment, its current valuation seems unwarranted. MNST has a Value Score of D.
Is MNST Well-Poised on Long-Term Growth Plans?
While Monster Beverage’s challenges are evident, its growth initiatives could play a pivotal role in reversing recent stock declines. The company continues to drive performance through its diverse portfolio of energy drink brands, including Monster Energy, Monster Rehab, Java Monster and Monster Hydro, catering to a wide range of consumer preferences.
Innovations such as Monster Hydro Super Sport and Monster Dragon Tea strengthen its market appeal. Product innovation remains a key driver of success, with the company consistently launching new offerings to fuel growth. Additionally, Monster Beverage has been capitalizing on the expansion of the energy drinks category and sees promising opportunities within its alcohol brand division.
Final Thoughts on MNST Stock
Monster Beverage finds itself at a crucial juncture, facing weak technical indicators and recent stock underperformance, which calls for a cautious investment approach. While the company's strong brand portfolio, innovation and long-term growth strategies remain promising, the sharp decline in its share price reflects investor uncertainty. With the company still to recover its margins in full, Monster Beverage comes with an element of caution. Currently, MNST has a Zacks Rank #4 (Sell).
Three Stocks Looking Good
We highlighted some better-ranked stocks from the broader Consumer Staples space, namely Freshpet, Inc. FRPT, Vita Coco Company COCO and US Foods Holding USFD.
Freshpet, together with its subsidiaries, manufactures, distributes and markets natural fresh meals and treats for dogs and cats. It currently carries a Zacks Rank #2 (Buy). FRPT delivered an earnings surprise of 144.5% in the last reported quarter. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Freshpet’s current fiscal year’s sales and earnings implies growth of 27.2% and 227.1%, respectively, from the year-ago reported number.
Vita Coco develops, markets and distributes coconut water products under the Vita Coco brand name in the United States, Canada, Europe, the Middle East, Africa and the Asia Pacific. The company presently has a Zacks Rank of 2. COCO has a trailing four-quarter earnings surprise of 17.6%, on average.
The Zacks Consensus Estimate for COCO’s current financial-year sales and earnings suggests growth of 3.7% and 29.7%, respectively, from the year-ago reported figures.
US Foods Holding which engages in the marketing, sale and distribution of fresh, frozen, and dry food and non-food products, currently carries a Zacks Rank #2. USFD delivered an earnings surprise of 8.2% in the last reported quarter.
The consensus estimate for US Foods’ 2025 sales and earnings calls for growth of 1.4% and 4.6%, respectively, from the prior-year reported levels.
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