On Friday, Deutsche Bank (ETR:DBKGn) adjusted its outlook on Monster Beverage Corporation (NASDAQ:MNST) shares, reducing the price target to $63 from the previous $66 while reaffirming a Buy rating on the stock.
The decision comes after Monster Beverage held a business update during its annual shareholder meeting. Management acknowledged some recent challenges in the U.S. market but noted continued strength in untracked channels and most of its core international markets.
Monster Beverage has announced a 5% price hike on core Monster brand SKUs in the U.S. set to take effect on November 1. The company also plans to increase promotional activities for its Bang, Reign, and Reign Storm brands to boost consumer engagement and trials. Despite these initiatives, Deutsche Bank has incorporated more conservative assumptions for the company's U.S. performance in the near to medium term.
Consequently, the firm has revised its FY24 earnings per share (EPS) estimate for Monster Beverage downward to $1.74 from $1.80. The analyst from Deutsche Bank stated that while U.S. market weaknesses are factored into the current valuation, the long-term potential for Monster Beverage remains positive due to the opportunities to expand and increase profitability internationally.
The analysis by Deutsche Bank suggests that the investment community has already accounted for the recent softness in the U.S. tracked channels in the valuation of Monster Beverage shares. The firm's stance indicates a belief in the sustained growth prospects of the company, driven by its global operations.
In other recent news, Monster Beverage Corporation has been the subject of several financial adjustments and strategic initiatives. The company completed a significant $3 billion share buyback, buying back approximately 5.4% of its outstanding common stock.
Despite this, Jefferies, Roth/MKM, and BMO (TSX:BMO) Capital Markets reduced their price targets on Monster Beverage due to concerns about a slowdown in the company's core US energy drink sales and higher anticipated costs.
Piper Sandler also maintained a neutral rating on the company, adjusting its earnings per share estimates slightly due to higher corporate costs and lower-than-expected losses in the Alcohol Brands division. The company reported record net sales of $1.9 billion in the first quarter of 2024, marking an 11.8% increase from the previous year.
Changes in executive leadership are expected, with Co-CEOs Rodney Sacks and Hilton Schlosberg preparing for a transition in 2025. These recent developments are part of Monster Beverage's strategic initiatives aimed at enhancing shareholder value and navigating the complexities of its corporate expenditures and the performance of its various segments.
InvestingPro Insights
As Monster Beverage Corporation navigates through market challenges, InvestingPro data reveals a nuanced picture of the company's financial health and stock performance. With a market capitalization of $50.75 billion and a robust gross profit margin of 53.45% over the last twelve months as of Q1 2024, Monster Beverage shows significant profitability. The company has also experienced a revenue growth of 13.08% during the same period, indicating its ability to expand its top-line figures.
However, the stock has been under pressure recently, with a one-week total price return of -7.53% and a three-month price return of -19.2%, trading near its 52-week low. This may align with the InvestingPro Tip that the stock is in oversold territory based on its Relative Strength Index (RSI). Additionally, Monster Beverage's cash flows can comfortably cover interest payments, and the company holds more cash than debt, providing financial stability amidst market volatility.
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