UPDATE: Morgan Stanley Upgrades Monster Beverage (MNST) to Overweight

(Updated - August 13, 2015 1:56 PM EDT)

Morgan Stanley upgraded Monster Beverage (NASDAQ: MNST) from Equalweight to Overweight with a price target of $160. Analyst Dara Mohsenian thinks the stock deserves to trade a premium to peers given strong growth and sees upside to consensus in 2016/2017 as transition issues abate, US trends rebound, and benefits of its Coca Cola (NYSE: KO) deal ramp.

"The stock has pulled back 10% from recent highs on the lack of announced share repurchases post the KO deal and weaker-than-expected Q2 results. However, we view these issues as transitory as we still expect MNST will eventually pursue repurchases with its ~$3B pro-forma cash balance post the KO deal, although we have pushed back the starting point for repurchases to Q4 from Q3 (which brings down our 2015/2016 EPS forecasts by -2.5%/-0.5%, respectively)," said Mohsenian.

"In addition, we view the recent -8% Q3 topline miss vs. consensus as transitory, related to lower KO system inventory/increased out of stocks in the US, which should now be mostly resolved, and internationally, less focus from distributors where MNST may transition to the KO system, which should be alleviated when the territories switch distribution hands. We view this pullback as an opportunity, and remain well above consensus EPS (by ~10%) on Monster in the out years in 2016/2017, driven by an expected rebound in US trends behind fall price increases, and as we believe the Coke deal will drive a significant international sales acceleration from greater distribution expansion and margin boost from local production," 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 $142.15 yesterday.

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