Goldman Sachs Downgrades Monster Beverage (MNST) to Neutral, Removes From Conviction Buy List

(Updated - May 8, 2015 8:46 AM EDT)

Goldman Sachs downgraded Monster Beverage (NASDAQ: MNST) from Conviction Buy to Neutral with a price target of $150 (unchanged). Analyst Judy E. Hong thinks valuation reflects long-term growth and upside in the stock is limited given the stock's recent run.

"While we remain constructive on the long-term growth opportunity for MNST and view the pending KO deal as transformational, we now see more limited upside as valuation has expanded to 43.0X P/E (~25X pre-KO deal). We tweak our estimates down 2-4% to reflect the 1Q miss, later than expected closing of the KO deal, and slightly lower sales growth in the US (macro and market share) and Int’l (transition disruption) in the near-term," said Hong.

Hong called softer Q1 performance "mostly transitory."

"Underlying EPS of $0.62 was $0.06 below our estimate and consensus on weaker International sales and one-off expenses. MNST did not provide quarter-to-date gross sales trend as the distribution transition that already began in the US is creating significant noise in the data. MNST expects the KO deal to close in June and remains optimistic about leveraging KO’s distribution scale. We lower our estimates by 2-4% to $3.34/$4.00/$4.70 for 2015/2016/2017 on Q1 miss, the timing of KO deal now expected to close at the end of 2Q vs our prior estimate of beginning of 2Q and slightly softer sales growth in the US and Int’l," added the analyst.

For an analyst ratings summary and ratings history on Monster Beverage click here. For more ratings news on Monster Beverage click here.

Shares of Monster Beverage closed at $143.49 yesterday.

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