Monster Beverage Earnings: Solid International Growth, but US Demand Has Yet to Turn the Corner

Shares of narrow-moat Monster Beverage fell 3% in after-hours trading on Nov 7, as soft third-quarter results were partially offset by management’s favorable international growth outlook. Despite a spate of recent acquisitions in the energy drink category that brought in larger beverage rivals, including narrow-moat Keurig Dr Pepper buying Ghost and no-moat Molson Coors taking a majority stake in ZOA, we think Monster’s competitive standing in energy drinks remains largely intact. Our confidence is underpinned by Monster’s steadfast investment in innovation and brand marketing and its long-term distribution partnership with wide-moat Coke. In the coming years, we expect Monster to drive US growth with more flavored offerings and better-for-you options, while accelerating international expansion by offering premium and affordable products under different brands. We don’t plan any material changes to our 2024 estimates or our 10-year projections, leaving our $52 fair value estimate in place. Shares look fairly valued.