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UPDATE: UBS Downgrades Monster Beverage (MNST) to Neutral

July 28, 2014 8:15 AM EDT
Get Alerts MNST Hot Sheet
Price: $60.79 +0.56%

Rating Summary:
    21 Buy, 10 Hold, 1 Sell

Rating Trend: Down Down

Today's Overall Ratings:
    Up: 20 | Down: 14 | New: 22
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(Updated - July 28, 2014 10:43 AM EDT)

UBS downgraded Monster Beverage (NASDAQ: MNST) from Buy to Neutral with a price target of $73 (from $80). Analyst Stephen Powers said top-line risk now outweighs margin upside.

"Today we downgrade MNST to Neutral in light of decelerating top-line trends (both domestically and abroad), and a valuation that already largely bakes in the company's margin upside. While we have previously been more positive on the stock, recent data points (i.e., last week's C-store data, CCE disclosures, and conversations with industry participants) have all made it more difficult for us to justify a Buy rating," said Powers.

"Fear of a deceleration in MNST's US top line was ignited on MNST's Q1 earnings call when MNST only disclosed +8% all-in April sales growth (attributed to destocking), despite Nielsen data in tracked channels implying double-digits. Since that time, it appears that consumer takeaway has caught up with April's sell-in numbers, rather yhan the reverse, while international growth has slowed (most notably in Europe). We now forecast only +8% US DSD growth through 2015, alongside +15% International. Below the top line, we remain bullish on margins, but our forecasts already imply +240 bps of average annualized margin expansion over the next 10+ years, and assume international profit margins of ~25% by 2025—hardly conservative estimates," he added.

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 $67.01 yesterday.



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