Lofty Expectations to Blame for Hansen Natural's Freefall

| About: Monster Beverage (MNST)

When we wrote about Hansen Natural (HANS) in our 7/15 report, this high flyer was soaring at around the $46 level, the winds of excess expectations keeping it aloft. It's only a matter of time, we speculated, before the bottom falls out.

Well, the company reported strong second quarter earnings yesterday (sales up 83 percent to $156 million, net income up 85 percent to $28.2 million), meeting analyst EPS estimates, and slightly below sales estimates. But that was not enough to keep the energy drink maker from falling 26 percent, to $29.85. So much for estimates.

Lofty Expectations

Hansen has had a habit of beating analyst estimates by a wide margin, and this has become the expectation. Just meeting the consensus number was not enough, however, and the results are clear. This is not an indictment of Hansen the company. It's an indictment of the valuation that we as investors placed on this former $40 million market cap company, which became a mid-cap in short order.

HANS 1-month chart:

HANS 1-month chart

Disclosure: The author does not have a position in this stock.