Monster Beverage Could Hit New Highs After Earnings

Nasdaq-100 component Monster Beverage Corp. (MNST) is trading just 7 points below September 2020’s all-time high in Tuesday’s U.S. session, following a June breakout above 2-year resistance. The stock got a boost from Guggenheim ahead of the opening bell, with the tier one firm raising their price target. The bullish call comes just one week after Bank of America Securities pounded the table on the stock, insisting it deserves a higher valuation than the current 37.98 price-to-earnings ratio (P/E).

Monster Beverage Earnings Opportunity

Coca-Cola Co. (KO) owns 16.7% of Monster Beverage, leading to persistent speculation the Dow component and international icon will eventually acquire the company at a hefty premium. Monster will report Q3 2020 earnings on Nov.5, with analysts expecting a profit of $0.62 per-share on $1.24 billion in revenue. If met, earnings-per-share (EPS) performance will mark at least a 13% increase compared to the same quarter in 2019.

Guggenheim analyst Laurent Grandet raised their target to $90 on Tuesday, noting “We are adjusting our model ahead of results, where we expect a meaningful sequential organic sales improvement to +11% as consumer mobility has increased, driving growth in the convenience channel. Although we continue to expect short-term headwinds from Covid-19 and we see increased competitive pressures heading into next year, we still think there is a high likelihood that Coca-Cola will increase its ownership of Monster over time”.

Wall Street And Technical Outlook

Wall Street consensus is mostly bullish, with a ‘Moderate Buy’ rating based upon 8 ‘Buy’ and 2 ‘Hold’ recommendations. One analyst is recommending that shareholders close positions and move to the sidelines. Price targets range from a low of just $57 to a Street-high $93 while the stock is now trading about $6 below the median $86 target. The humble placement offers plenty of upside potential if the company meets or exceeds quarterly estimates.

Monster Beverage topped out at 70 in January 2018 and entered a trading range, with support just below 50. It finally broke out in June 2020, adding 17 points into September’s all-time high at 87.07. The stock then sold off with other Nasdaq-100 components and has been testing 50-day moving average support for the last 6 weeks. A bounce off this trading floor could generate healthy buying interest, lifting above the prior high and toward the 100 level.

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