Despite Monster Beverage’s return to double-digit growth in dollar sales in the four-week period ending 12/20/14, analysts aren’t sold that the company can keep it up in 2015. In a Wells Fargo Securities report published Jan. 13 — just prior to the company’s earnings report — analyst Bonnie Herzog downgraded Monster’s stock rating from “outperform” to “market perform.”
Citing a recent survey examining Monster sales trends, Herzog maintained that “we remain bullish on Monster’s long term story,” but pointed to several reasons behind the downgrade. For one, Herzog’s predicting that Monster may experience some growing pains as the company transitions almost half of its distribution from the Anheuser-Busch system to Coca Cola’s.
“While we remain very confident that ultimately distribution through one partner will be positive, ‘bumps’ will inevitably occur in the short-term which could negatively impact Monster’s sales in the first half of 2015,” she explained.
Second, competition from Red Bull, particularly in the realm of product innovation may hamper Monster’s growth as the two companies compete for territory. Lastly, the report called Monster’s current valuation “too rich,” recommending against investors adding new money at current stock prices.
If the stock has hit a temporary plateau, as Herzog suggests, Monster CEO Rodney Sacks might have cashed out at the right time: last week he unloaded 100,000 shares of Monster stock in a transaction worth $11,169,000. Sacks still owns 661,710 shares, currently valued at $73,906,389.
Despite the downgrade, Monster stock was up 1.03 percent Tuesday afternoon trading at $113.11.