Call Details:
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Energy drinks have the best secular growth prospects within the broad beverage category. Driven by lifestyle trends, health & wellness, taste preferences, and demographics energy drinks have at least a decade of growth ahead. Behind the category's growth is caffeine and its spreading presence in beverages. Although it is less addictive and habit-forming, caffeine becomes part of the consumers' lives. As a daily consumption choice, consumers actively identify with their brands. Monster Energy is one of the leading brands in the energy drink market.
Monster Energy has missed consensus expectations for the past four quarters. EPS has also declined for four consecutive quarters. We do not expect either to change this quarter. However, we do see a coming inflection in margins and reasons to buy the shares before another re-rating in the multiple.
Monster Energy has entered the beverage alcohol sector for the first time with the acquisition of CANarchy. A merger with Constellation Brands is off the table, but questions remain. The next move up for the share price does not need a successful entry into alcohol, it will be in spite of it.
Beyond Monster Energy's own profit forecasts and investment prospects, our Black Book will focus on the following:
- The secular growth in energy drinks.
- The opportunity in alcoholic beverages.
- The pros and cons of using the Monster brand in beverage alcohol.
- M&A possibilities.
- The international opportunity.
- An assessment of the competitive environment.
- Where we think the consensus is wrong on projections.
- Why Monster Energy belongs in your Quad 4 portfolio.
Historically, Monster Energy outperforms the S&P 500 in every quad. The investment themes for our call:
