Monster Beverage (NASDAQ: MNST) posted their Q4 2019 earnings today.
Revenue was $1.02 billion which was roughly in-line with analysts’ estimates of $1.01 billion.
EPS was $0.47 which was in-line with analysts’ estimates of $0.47
You may be surprised to learn that the best performing stock on the S&P500 since the year 2000 is none other than Monster Beverage back when it was called Hansen’s Brand Beverages and traded for a meager $0.08/share. Currently, in February of 2020, the stock is just over $60/share, representing a 750X change in 20 years.
As With Most Things In Life, It Began In California
Monster Beverage was originally founded as Hansen’s Brand Beverages in 1935 in California. Originally, Hansen’s sold juice products before renaming themselves to Monster Beverage and delving into the energy drink business in 2012. This became so successful that Monster was willing to let go of their juice products segment by selling that part of the business to Coca-Cola in 2015. By of May 2012, Monster held nearly 35% of the U.S. energy drink market, then valued at $31.9 billion.
The Name Of The Game For The Energy Drink Business Can Be Summed Up In One Word: Sponsorships
Another famous energy drink brand, and Monster’s main rival, Red Bull, has established its reputation and marketed themselves by spending loads of cash sponsoring sports teams and events. The company has absolutely plastered their logo over every inch of every banner, billboard, team uniform of every sporting event you can possibly think of. Monster Beverage was not going to be left out of this game. Seeing the success of Red Bull, it has become very clear that in order to succeed in the energy drink business, massive advertising budgets and deals are needed or else the company will be left in the dust.
In 2016, NASCAR announced on Dec. 1, 2016 a multi-year deal that will make Monster Energy only the third entitlement sponsor in its premier series history. The company is continuing to sponsor individual racers even after this deal with NASCAR ended in 2019.
What’s Next For Monster Beverage?
The valuation on Monster Beverage is rich. At a forward P/E of above 28, it is looking more like a tech company than a beverage company.
Source: Ycharts
Although its high valuation is somewhat justified by the fact that Monster is among the highest in the drink industry in terms of EBITDA Margin at around 35%
Source: Ycharts
Also, according to Yahoo Finance, the company is expected to grow their sales by more than 9% in 2020. This is especially impressive seeing as it is just about double the expected sales growth rate of Coca-Cola, estimated at 4.7% and PepsiCo at 4.1% during the same timeframe.
Source: Yahoo! Finance
Still, it’s hard to call Monster a good value stock at its current levels. The price would have to come down a bit more for it to be a solid buy. But the future certainly looks promising for Monster as they continue to dominate the energy drink business and will likely maintain that dominance for years to come.
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