On Thursday, Stifel analysts maintained a Buy rating on Monster Beverage (NASDAQ:MNST) with a steady price target of $59.00. The firm's analysis ahead of the company's investor meeting on January 21, 2025, delved into sales growth and market share trends in Monster’s key international markets, which make up about half of the company's international sales.
Despite recent foreign exchange (FX) movements prompting a downward adjustment in the company’s earnings per share (EPS) estimates for 2025-2026, the analysts see more positive than negative factors influencing the company's performance.
Stifel's report highlighted that Monster has achieved a compound annual growth rate (CAGR) of 13% in its sales from 2020 to 2024, outpacing the energy drink category's 8% CAGR, in spite of a 22 percentage point cumulative FX headwind. This growth rate is a deceleration from the 24% sales CAGR seen from 2016 to 2020, which faced a lower 9 percentage point cumulative FX headwind.
The analysis also pointed to drivers of accelerated growth for Monster and the U.S. energy drink category, noting that recent pricing adjustments have been effective and promotional activity remains in line with historical levels.
The report underlined Monster's continued robust growth within the expanding energy drink sector. With current revenue of $7.41 billion and a solid gross profit margin of 53.77%, InvestingPro analysis reveals the company maintains strong profitability metrics, including an 18.49% return on assets. The analysts predict sustained low-double-digit revenue growth, driven by the company's strong existing U.S. business and market share gains internationally.
The U.S. convenience store channel, which represents approximately 70% of U.S. sales and 46% of total sales, is expected to play a significant role in the near-term recovery rate. Stifel also underscored the potential for international expansion, with Monster's estimated global market share outside the U.S. at around 20% in 2022, compared to its mid-30% share within the U.S. market.
In other recent news, Monster Beverage experienced several noteworthy developments. BNP Paribas (OTC:BNPQY) Exane adjusted its outlook on the company, reducing the price target to $45 while maintaining an Underperform rating due to slowing growth in Monster Beverage's international business. BMO (TSX:BMO) Capital Markets also reduced its price target to $53, citing operational challenges and softer sales, but maintained its Market Perform rating.
Monster Beverage reported a slight increase in net sales for Q3 2024, despite challenges such as Hurricane Helene's impact on its brewery operations and increased operating expenses. However, the company noted a decrease in net income and earnings per share, with the current EPS forecast for FY2024 standing at $1.71.
RBC (TSX:RY) analysts highlighted Primo Brands, Chewy (NYSE:CHWY), and Planet Fitness (NYSE:PLNT) as their top picks across various consumer and retail sectors, but Monster Beverage was recognized for its potential for pricing benefits and expansion outside the U.S.
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