Citi maintains Monster Beverage buy rating, $64 target

On Wednesday, Citi reaffirmed its Buy rating and $64.00 price target for Monster Beverage shares (NASDAQ:MNST), following a negative report from Spruce Point Capital Management that led to a decline in the company's stock. According to InvestingPro data, Monster maintains a "GREAT" financial health score, with the stock currently trading at $55.01, showing a 4.66% gain year-to-date despite recent volatility. Citi analyst Filippo Falorni addressed the concerns raised by Spruce Point, which had released a report on Tuesday titled "A Monster Short," causing Monster Beverage shares to fall by 3.7% compared to a 1.6% drop in the S&P 500.

Falorni contested the points made by Spruce Point, which were detailed in a 79-page presentation. He emphasized that competition in the U.S. is not a new challenge and pointed out that the U.S. energy drink category has shown signs of acceleration over recent months. Supporting this view, InvestingPro data reveals Monster's impressive 54% gross profit margin and strong balance sheet position, with more cash than debt. Additionally, Falorni highlighted Monster Beverage's solid international growth prospects, with significant potential for increased per capita consumption (PCC) and market share.

The Citi analyst also mentioned the company's strategic moves, such as hedging on aluminum costs, which are expected to protect gross margins through the first half of 2025. Falorni believes that Monster Beverage's higher valuation compared to its peers is justified by its superior top-line and earnings per share (EPS) growth, as well as its net cash position.

Despite the short-seller's report, Citi stands by its positive outlook for Monster Beverage, anticipating accelerating trends in the U.S. market and easier comparisons for category and market share as the summer approaches. The firm also expects continued international growth to contribute to the company's performance. For a deeper understanding of Monster Beverage's valuation and growth prospects, investors can access comprehensive analysis and 12 additional ProTips through InvestingPro's detailed research report, part of its coverage of over 1,400 US stocks.

In other recent news, Monster Beverage reported revenues of approximately $7,492 million and EBITDA of $2,188 million for the last 12 months ending December 31, 2024. Stifel analysts maintained a Buy rating on Monster Beverage with a $59 target, highlighting strong international sales growth and a higher-than-expected gross margin. Meanwhile, Piper Sandler reaffirmed a Neutral rating with a $51 target, noting an uptick in retail momentum and manageable cost expectations. Monster Beverage also advised shareholders against an unsolicited mini-tender offer from TRC Capital, which is below the recent market price. Additionally, the company announced that Rodney C. Sacks will step down as Co-CEO in June 2025, with Hilton H. Schlosberg set to become the sole CEO. Spruce Point, a short seller, criticized Monster Beverage's valuation, suggesting a potential downside risk of 25%-40%. The critique raised concerns about market competition, financial practices, and the company's relationship with Coca-Cola (NYSE:KO). Monster Beverage has yet to respond to these claims.

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