- 1 Thesis
- 2 About Monster Beverage
- 3 Valuation Ahead Of Fundamentals
- 4 Residual Earnings Valuation
- 5 Risks To My Thesis
- 6 Conclusion
- 7 Extra Information About why is monster so expensive That You May Find Interested
- 7.1 Monster Beverage: Simply Too Expensive | Seeking Alpha
- 7.2 Why is monster so expensive? – Foodly
- 7.3 Doe Energy Drinks Cost A Fortune? (Best Alternatives)
- 7.4 Why does Red Bull Cost More Than Monster? [Full Analysis!]
- 7.5 Here's why Energy Drinks Are pricey? [Full Analysis] – Dejittr
- 7.6 The price of Red Bull, other energy drinks may be about to …
- 7.7 Monster Energy Prices
- 7.8 Why is red bull so expensive? (Top 10 Reasons) –
- 8 Frequently Asked Questions About why is monster so expensive
- 8.1 Why do Monster energy drinks cost so much money?
- 8.2 Why did the cost of monsters rise?
- 8.3 Why do energy drinks cost so much these days?
- 8.4 Why is Monster Energy harmful to your health?
- 8.5 How many Monster Energy drinks are allowed per day?
- 8.6 What occurs if you consume Monster energy drink on a daily basis?
- 8.7 Why is there a shortage of monsters?
- 8.8 Do energy drinks represent a loss of funds?
- 8.9 What energy drink is the worst?
- 8.10 What energy drink is rated as being the best?
- 8.11 What three risks do energy drinks present?
- 8.12 Is one energy beverage per day okay?
- 8.13 What Monster beverage is the healthiest?
- 8.14 What occurs if I consume seven monsters?
- 8.15 Which flavor of Monster is healthiest?
- 8.16 How many coffee shots are in a Monster?
- 8.17 Is soda healthier than Monster?
- 8.18 What beverage contains the most caffeine?
- 8.19 Which is stronger, Monster or Red Bull?
Below is information and knowledge on the topic why is monster so expensive gather and compiled by the monanngon.net team. Along with other related topics like: Why are energy drinks so expensive Reddit, Why is Bang so expensive, Is Monster bad for you?, Why is Monster energy bad for you, Monster Energy stock performance, Why are energy drinks bad for you, How long do energy drinks last?, Does Monster have alcohol?.
everage: Simply Too Expensive
I am bearish on Monster Beverage (NASDAQ:MNST) as I see the company’s stock as overvalued. In my opinion, trading at a P/E of close to x40, the current market environment provides much better opportunities for investors to allocate capital. Notably, Monster Beverage stock did not lose much value YTD and thus outperformed the S&P 500 by about 20 percentage points. I like to view the current share price strength as a selling-opportunity and rotate capital into bargain opportunities, such as Victoria’s Secret (VSCO), Meta Platforms (META), or Volkswagen (OTCPK:VWAGY). I value MNST stock with a residual earnings framework, anchored on analyst consensus EPS estimates, and calculate a fair implied share-price of $59.88.
About Monster Beverage
Monster Beverage is a consumer company that develops, manufactures and markets energy drinks. The company operates three major segments: Monster Energy Drinks, Strategic Brands and Alcoholic Beverages. Notably, Monster Energy Drinks is about 95% of total sales and Strategic Brands accounts for the rest. Alcoholic Beverages, as of 2021 does not account for any noteworthy share of sales for the group. Geographically, more than 60% of sales are generated in the North America Region and slightly less than 20% in EMEA. Asia Pacific and Latin America make up the rest.
Growing revenues significantly above 10% CAGR for the past 5 years, many investors regarded Monster Beverages as an international growth story. The company has quickly grown to claim more than 40% of the global energy drink market, only slightly behind Austrian-based Red Bull. Accordingly, MNST share price jumped from about $6/share in early 2021 to more than $90/share as of 2022. This represents a 1,400% total return and 25% annualized.
Given these numbers, the company’s stock has been awarded with a rich growth multiple. Accordingly, the company’s current > x39 P/E implies that Monster beverages expansion is expected to continue.
Valuation Ahead Of Fundamentals
However, I would like to point out that Monster Beverage is trading at an expensive price. Especially considering rising real yields and falling asset prices across markets make MNST elevated P/E vulnerable to multiple contraction. Moreover, Monster Beverages’ margins are not immune to rising commodity costs and wage inflation. That said, I see a scenario of 30% multiple contraction in combination with a 15% EPS reduction not as unlikely, which could imply about 40% share-price downside.
But even if there is no EPS and multiple contraction it is easy to show that the market is considerably ahead of analyst consensus. For reference, according to the Bloomberg Terminal as of July 15th, Monster Beverage’s revenues in 2022, 2023 and 2024 are expected at $6.42 billion, $7.08 billion and $7.81 billion. This is a CAGR growth materially below the company’s historical performance. Respectively EPS are estimated at $2.34, $3.08 and $3.53.
From 2018 to 2021, Monster Beverages increased revenues from $3.8 billion to $5.5 billion, reflecting a 3-year CAGR of about 13%. Over the same period, EBITDA jumped from about $1.35 billion to approximately $1.85 billion (11% CAGR).
Monster Beverages is as good as debt-free with only $34 million of financial liabilities and more than $2.7 billion of cash and short term investments. In 2021, cash provided from operations was about $1.2 billion.
Residual Earnings Valuation
Let us now look at the valuation. What could be a fair per-share value for the company’s stock? To answer the question, I have constructed a Residual Earnings framework and anchor on the following assumptions:
- To forecast EPS, I anchor on consensus analyst forecast as available on the Bloomberg Terminal ’till 2025. In my opinion, any estimate beyond 2025 is too speculative to include in a valuation framework. But for 2-3 years, analyst consensus is usually quite precise
- To estimate the cost of capital, I use the WACC framework. I model a three-year regression against the S&P 500 to find the stock’s beta. For the risk-free rate, I used the U.S. 10-year treasury yield as of August 13, 2022. My calculation indicates a fair required return of 8%.
- To derive MNST’s tax rate, I extrapolate the 3-year average effective tax-rate from 2019, 2020 and 2021.
- For the terminal growth rate, I apply 3.5 percentage points to reflect growth slightly greater (ca. 1%) than estimated nominal GDP growth.
Based on the above assumptions, my calculation returns a base-case target price for MNST of $59.80/share, implying material downside of almost 35%.
I understand that investors might have different assumptions with regards to MNST’s required return and terminal business growth. Thus, I also enclose a sensitivity table to test varying assumptions. For reference, red-cells imply an overvaluation as compared to the current market price, and green-cells imply an undervaluation.
Risks To My Thesis
As a function of valuation, I argue MNST is a Sell. However, I acknowledge that Monster Beverage has proven a steady track-record of topline growth and value accumulation. Accordingly, the company might grow into its stretched valuation within the next 12 – 24 months. If this were to happen, and the valuation becomes “reasonable,” I would turn more neutral on the stock.
Monster Beverages is no doubt a quality business. However, the price is simply too high to justify an above-market return expectation for investors. Especially since many stocks are trading cheaply at the moment, given the recession scare and growth decelerating, I argue investors can find much better buying opportunities than MNST. As a function of valuation, I initiate with a Sell recommendation. My target price is $59.80/share.
This article was written by
5y experience as an investment analyst for a major BB-Bank. Currently working towards the CFA charter. Passion for risk-assets (Growth, Contrarian, Emerging Market) ex-colleague and close friend of Investor Express
Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: Not financial advise.
Extra Information About why is monster so expensive That You May Find Interested
If the information we provide above is not enough, you may find more below here.
Monster Beverage: Simply Too Expensive | Seeking Alpha
Why is monster so expensive? – Foodly
Doe Energy Drinks Cost A Fortune? (Best Alternatives)
Why does Red Bull Cost More Than Monster? [Full Analysis!]
Here's why Energy Drinks Are pricey? [Full Analysis] – Dejittr
The price of Red Bull, other energy drinks may be about to …
Monster Energy Prices
Why is red bull so expensive? (Top 10 Reasons) –
Frequently Asked Questions About why is monster so expensive
If you have questions that need to be answered about the topic why is monster so expensive, then this section may help you solve it.
Why do Monster energy drinks cost so much money?
The cost of making each can of drink is a factor in the equation because it is unlikely that the manufacturer will sell it for less than it costs to make it; once that floor price is established, supply and demand takes over.
Why did the cost of monsters rise?
Inflationary operational costs for aluminum cans, shipping, freight, and other inputs hurt the company’s bottom line in the third quarter of 2022. Higher freight rates and fuel costs have been hurting Monster Beverage’s gross and operating margins for a while, which persisted in the third quarter as well.
Why do energy drinks cost so much these days?
Energy drink manufacturers must follow other food producers in raising prices to protect profits, as sugar prices have increased 33% over the past year, which is another important raw material used in the production of energy drinks.
Why is Monster Energy harmful to your health?
Large doses of caffeine may harm children’s still-developing cardiovascular and nervous systems, as well as cause serious heart and blood vessel issues like heart rhythm disturbances, increases in heart rate, and blood pressure.
How many Monster Energy drinks are allowed per day?
While consuming up to 400 mg of caffeine per day is generally safe, drinking more than four 8-ounce (240 ml) servings of energy drinks per day, or two 16-ounce (480 ml) cans of Monster, may result in side effects from too much caffeine, such as insomnia or headache (9, 10).
What occurs if you consume Monster energy drink on a daily basis?
According to Popeck, excessive or regular energy drink consumption can cause heart arrhythmias, headaches, high blood pressure, and anxiety in the US. In 2011, more than 20,000 emergency room visits were linked to energy drink use.
Why is there a shortage of monsters?
Because of aluminum can shortages and delays in obtaining certain ingredients, the company is having logistics and supply chain issues, which prevented it from meeting demand in Q2 2021 despite recording the highest quarterly revenues in the company’s history.
Do energy drinks represent a loss of funds?
As for energy drinks themselves, Tavel says they’re a waste of money. Their power comes from caffeine, the same kind found in coffee. While their consumption is popular among kids, the age group that reports the highest daily consumption are those ages 30 to 39.
What energy drink is the worst?
1. Reign. With 300 mg of caffeine and 0 grams of sugar in 16 ounces, Reign takes the top spot as the unhealthiest energy drink.
What energy drink is rated as being the best?
In the United States, Red Bull, an Austrian-made beverage that has been around since 1987 and is now available in over 165 countries, is the top energy drink.
What three risks do energy drinks present?
One of the risks of energy drinks is dehydration (not getting enough water in your body), followed by anxiety and heart problems like irregular heartbeat and heart failure.
Is one energy beverage per day okay?
According to the Mayo Clinic, healthy adults who choose to drink energy drinks should not consume more than one can per day. Up to 400 milligrams of caffeine appears to be safe for most adults.
What Monster beverage is the healthiest?
We discovered Monster Energy Ultra, a line of energy drinks that are low in calories, sugar-free, and also have a lot of B vitamins.
What occurs if I consume seven monsters?
As a result, the risks increase when you consume more than is necessary at once. This can put your body in danger from apparent caffeine toxicity, which can raise your heart rate quickly, spike your blood pressure, increase tremors, and cause symptoms of a stroke, all of which can be fatal.
Which flavor of Monster is healthiest?
However, some energy drinks, such as Monster Absolutely Zero, at least give the impression of being healthier than others. As its name implies, Absolutely Zero has no calories and no sugar.
How many coffee shots are in a Monster?
With 160mg of caffeine in a 500ml can, which is roughly four times as much as a shot of espresso, Monster Original has one of the highest caffeine and sugar levels of the drinks analyzed.
Is soda healthier than Monster?
According to Sharon Richter, RD, a nutritionist in New York City, “Soda and commercial energy drinks are both harmful to your health.” They are both very high in sugar, which can cause weight gain, tooth decay, and an increased risk of diabetes and heart disease. On paper, however, soda and energy drinks are not that dissimilar.
What beverage contains the most caffeine?
DynaPep has the highest amount of caffeine per fluid ounce of any beverage on the market, at 714.3 mg.
Which is stronger, Monster or Red Bull?
Monster energy has a whopping 54 grams of sugar, whereas Red Bull only has 37 grams, giving it a sweeter flavor. Both drinks have a very high caffeine content; Monster has a whopping 89 milligrams and Red Bull has 111.