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BMO cuts Monster Beverage target to $53, maintains rating

Published 2024-11-08, 02:52 p/m
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On Friday, BMO (TSX:BMO) Capital Markets adjusted its expectations for Monster Beverage Corporation (NASDAQ:MNST), citing a mix of sales and operational challenges reflected in the company's recent performance. The firm has revised its price target on the NASDAQ-listed stock (NASDAQ:MNST) to $53.00, a slight decrease from the previous target of $54.00. Despite the adjustment, the analyst maintained a Market Perform rating on the stock.

Monster Beverage reported third-quarter earnings per share (EPS) of $0.40, which was $0.03 shy of the consensus estimate. The shortfall was attributed to a combination of slightly softer sales, reduced gross margins, and increased operating expenses. Sales growth for Monster Beverage slowed down to 1.3%, compared to the expected 2.9%, with quarter-to-date growth remaining stable when an extra shipping day is excluded. This comes before a planned price increase in the U.S. market.

In response to these results, BMO Capital has revised its estimates downward. The decision to lower the price target to $53 reflects the firm's recalibrated expectations. However, the analyst remains optimistic about Monster Beverage's long-term growth potential. The firm believes that for the stock to see significant upside, there must be a sustainable reacceleration in sales growth, which is likely dependent on an improved category and consumer environment.

The report also highlighted the impact of broader market conditions on Monster Beverage's performance. The company's sales growth deceleration is seen in the context of overall softness in the category. The analyst suggests that the company's future performance is contingent on broader improvements in the consumer landscape, which could drive sales growth and, in turn, stock performance.

InvestingPro Insights

To complement BMO Capital's analysis of Monster Beverage Corporation (NASDAQ:MNST), recent data from InvestingPro offers additional context to the company's financial position and market performance.

Despite the challenges highlighted in the earnings report, InvestingPro data shows that Monster Beverage has maintained a strong market presence with a substantial market capitalization of $53.15 billion. The company's revenue for the last twelve months as of Q2 2024 stood at $7.39 billion, with a revenue growth of 10.38% over the same period. This growth, while slower than previous quarters, still indicates resilience in the face of market headwinds.

InvestingPro Tips reveal that Monster Beverage holds more cash than debt on its balance sheet, suggesting financial stability even as the company navigates through a period of softer sales. This aligns with the analyst's long-term optimism about the company's growth potential. Additionally, the company's aggressive share buyback program, as noted by InvestingPro, could potentially support stock value in the near term.

However, investors should note that Monster Beverage is trading at a high P/E ratio relative to its near-term earnings growth, with a current P/E ratio of 33.54. This valuation metric may warrant caution, especially given the recent earnings miss and lowered price target by BMO Capital.

For those seeking a more comprehensive analysis, InvestingPro offers 8 additional tips that could provide deeper insights into Monster Beverage's financial health and market position.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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