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Monster Beverage: The Energy Behind A 500% Surge And Counting

Sep. 18, 2023 2:10 AM ETMonster Beverage Corporation (MNST)KO, PEP35 Comments

Summary

  • Monster Beverage Corporation is a dominant player in the energy drinks market, leveraging sports partnerships for effective promotion.
  • Despite inflationary challenges, MNST has achieved record sales and implemented resilient pricing strategies.
  • Key acquisitions and strategic expansion position the company for future growth, making it an enticing investment option.
  • Looking for a helping hand in the market? Members of iREIT on Alpha get exclusive ideas and guidance to navigate any climate. Learn More »

Monster Beverage Display IV

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Introduction

I was 17 when I had my first energy drink - can you imagine? The first time I tried it was when I had to study for a few important exams. I went with a generic brand that got the job

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This article was written by

Leo Nelissen profile picture
28.65K Followers

Leo Nelissen is an analyst focusing on major economic developments related to supply chains, infrastructure, and commodities. He is a contributing author for iREIT on Alpha.

As a member of the iREIT on Alpha team, Leo aims to provide insightful analysis and actionable investment ideas, with a particular emphasis on dividend growth opportunities. Learn More.

Analyst’s Disclosure: I/we have a beneficial long position in the shares of PEP either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (35)

m
well your wish is now your command..mnst/spy pair which has plummeted from off the charts rich in may to near 1 sigma cheap (horizon goes back to 3/98) .. on a shorter term horizon (3yr) we are trading 1.5 sigma cheap.. pair was near 2.5 sigma cheap in march 22.. on absolute basis we see headed towards 10/21/22 low close of 43.8
ghrelin profile picture
a fair value ev/ebitda is 22.50!?!?! that's pretty crazy high. That is a 4.4% Yield on EBITDA, the equity risk premium for the last 100 years has averaged 5.5% which would make the maximum multiple 18 and that should be pre-tax EBIT. MNST is at best a $40 fairvalue stock.
redarrow5150 profile picture
@ghrelin So Monster should be given the same multiple as everyone else? No debt and a cash machine and a growing category. GTFO
ghrelin profile picture
@redarrow5150 growing category? they have a 5yr growth of 13% in a secular industry. If you're comparing returns to the SP500 you should use the same multiple for any stock that you use for MNST, if you're just comparing returns of MNST to KO and PEP then you're right use a higher multiple. But that's not logical...

it makes no sense to evaluate a company based on only it's peers BUT compare its performance to all stocks. that's like finding an above average chicken at the grocery store for $100 and saying that's a good deal when there's a whole cow selling for $100.

Multiples are more wall-street engineering to make sense of the irrational things they do to their LPs just to collect commission. the SP500 right now is at a 19.5x's fwd earnings multiple and growing at 8%, MNST is trading at a fwd 34x's earnings multiple and going to grow at 11% next year.

Notice i used real numbers in my explanation.
redarrow5150 profile picture
@ghrelin Uh huh. No debt. Again the category is growing which for some reason gets lost in your real numbers. Soda sales? Rising?
a
However, drink Celsius….
10 vs 230 calories.
Zero sugar or aspartame.
Great flavor.
….Live Fit!
ghrelin profile picture
@atwood.todd ahhhhh yes... its the difference of 200 calories and aspartame that makes Celsius a "Health" drink. Diet mountain dew is also just as good for you as water, so i need to buy PEP
a
@ghrelin Yes, plus the can graphics … the total bundle. Simply compare side by side vs Monster/Red Bull. Talking to a different consumer. Yes PEP an outstanding company, and price increasingly attractive, though who knows if found a bottom.

ps: is zero aspartame (as well as no sugar)
ghrelin profile picture
@atwood.todd jokes aside there's tons of fluoride in our water any way. everything we eat and drink is bad for us at this point. at least energy drinks taste good
T
Great write up. I actually made an investment in the competitor CELH about 4 years ago and was DCA over a year around $42 a share and has become my biggest bagger in the last decade. I have seen MNST all over the world in my travels (South Korea, Hong Kong, etc) and realized though it has its best years behind it possibly it’s still moving forward at a nice clip so have started buying in at these current prices ($56 ish) and hope to fill out a small position over 12 months. I don’t drink it either but see many that do (Celsius I actually do drink). Thanks!
Leo Nelissen profile picture
@Theranchhand Oh my... That's impressive!

Congrats and thanks for stopping by!
P
@Theranchhand What does DCA mean? Thank you.
T
@Pure 1 sorry, abbreviated Dollar Cost Averaging. Was buying lots of shares at different levels (30s to 80s) that averaged out to the 40s by the time I filled my max on investment number.
redarrow5150 profile picture
I've been an owner since 2005. During this time the cliche of it's expensive is just laughable. Compared to what? What company has no debt and is a cash machine? What others have failed to note is the expansion Monster has done without adding debt. They've opened in India, Japan and China without taking on debt. Finally, this category continues to grow and will one day overtake soda sales. (not fountain)
Leo Nelissen profile picture
@redarrow5150 Congrats! Killer investment!
W
Have owned this for a while, love the company & the drinks. I haven't tried their alcholic seltzers yet, the only place I see them is at Walmart.

I've also read that Monster is the best stock over the last 25 years, every $1 invested in Monster 25 years ago would have yielded $80 in gains. That's simply an amazing statistic to me. Thanks for the great article as always.
Leo Nelissen profile picture
@LesccoBrandon Congrats on a great investment!

Thanks for topping by. You're right. MNST has outperformed every major tech stock
siestadreamer profile picture
I always thought that Monster would be acquired one day.
Dr.DaveR profile picture
I'd look to start a position at $45 or lower. Looks about fairly valued now and just broke the uptrend it has been in since Oct 2022, lets see where it goes from here.
Leo Nelissen profile picture
@Dr.DaveR I like that approach. Thanks for stopping by!
P
@Leo Nelissen You agree that waiting for 45 or lower is a good idea? I think it will be extremely surprising if the stock ever goes back to that price again (without a massive drop in the whole market). The one flaw I found in your article was the suggestion that readers wait for pullback before buying. If the stock has significant prospects for the future, I think it would be a mistake to wait for a slightly better price. One might never get to own it. In my opinion, Monster could take a big step up at any time.
Leo Nelissen profile picture
@Pure 1 As a wild card play, I think waiting for a good opportunity is a good idea. I wouldn't apply the same strategy to some of the dividend growth stocks I own. As you correctly pointed out, it's a bit of a long shot
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