Monster Beverage: Monster Upside or a Risky Buy?

Key Points

• Monster Beverage has skeletons in the closet but may not be as scary of an investment as many think.
• Cash flow is solid and allows for aggressive share repurchases. 
• Analysts' sentiment is firming, and technical signals suggest a new high could be reached this year. 

Monster Beverage NASDAQ: MNST faces headwinds that make it a potentially scary buy, including weakness in the alcohol segment. With the alcohol business contracting in Q4 2024, rationalization is needed, posing a headwind for shareholder value.

However, strong performance in other segments and solid operations make it a compelling yet risk-aware investment. The question is how high the stock price can get and how likely it is to get there, and market signals indicate new highs can be set this year.

The analysts’ trends are among the signals indicating new highs for Monster Beverage in 2025. The 21 analysts tracked by MarketBeat show a high conviction in their Hold rating, with 52% of them rating at Buy and the price targets rising.

The activity post-release includes numerous positive revisions, lifting the consensus by 500 bps within hours of the release. The consensus assumes the fair value is near the November 2024 highs, but revisions lead to the high-end range, another 10% to 15% upside.

Monster Stock Leaps After Q4 Results; Confirms Uptrend

Despite mixed results, monster stock surged more than 5% following its Q4 release. The company grew revenue by 4.6% and outperformed marginally but missed consensus on the bottom line. However, the takeaways are that this company’s FX-neutral growth is in the high single digits and is expected to grow solidly in 2025.

Growth is underpinned by market share gains for the energy drink category and Monster products, including its core and growth brands. The Monster segment grew by 7.6%, led by an 11.1% increase Internationally. Alcohol is the weak spot, segmentally, contracting by 0.8% and incurring inventory charges. 

The margin news is also weak, with gains in gross margin offset by increased costs and expenses. Even so, the net result is favorable to shareholders, delivering $0.38 in EPS, which is flat compared to the prior year, and the miss was slim.

The critical takeaway is that the cash flow remains solid enough to sustain balance sheet health and capital returns in 2025. Balance sheet highlights at the end of 2024 include reduced cash, assets, and equity due to accelerated share repurchases offset by reduced debt, ultra-low liability, and a 4.2% reduction in the share count. That pace could be sustained in 2025 because the company has $500 million left under its current authorization, worth nearly 10% of the market cap with shares near $55. 

Institutions Provide a Tailwind for MNST Stock in Q1

The institutional activity is helping support the price action in MNST stock. The institutions have bought on balance for three consecutive quarters, with activity ramping to a two-year high in Q1. Buying was made by numerous institutions, not just fund managers, including public retirement capital, boutique investment firms, and international investors. Together, they own more than 72% of the stock and provide a significant tailwind for the market. 

Short interest or short covering is unlikely to factor in the post-release price surge. Short interest is relatively low—below 3%—and provides insufficient volume to drive such a movement. However, there is a risk of increased short selling as the price action moves higher, and it may already be capping gains. As bullish as the weekly chart looks, the daily chart indicates resistance at the recent highs that may not be broken until later in the year. 

The long-term outlook for Monster and its stock price is bullish. The company is expected to grow revenue at a consistent high-single-digit pace and produce leveraged earnings growth each year. The 28x P/E in 2025 falls below 10x in under a decade in that scenario, suggesting a deeply undervalued consumer stock.