Monster Beverage is the IBD Stock Of The Day for Tuesday as MNST stock nears an early entry for its flat base.
Corona, Calif.-based Monster Beverage leads an energy-drink duopoly with privately held competitor Red Bull. The company's portfolio of energy drink brands include Monster Energy, Reign and NOS Energy.
Monster dominates energy drinks in the U.S. and claimed a 39% market share last year, according to Jefferies data, resulting in a record $5.5 billion in revenue for the company. Red Bull accounted for 37% of the American energy drink market in 2021. Celsius, which is on an impressive growth streak, only claimed 4.9% of the market.
Monster's products span various performance beverage categories, with lines of hydration drinks and teas. And the company is expanding into the alcoholic beverage market following the $330 million acquisition of CANarchy Craft Brewery last February. This month, Monster plans to roll out the first flavored malt beverage under its namesake brand, called The Beast Unleashed.
Still, Monster's earnings have fallen for the past five quarters despite quarterly sales averaging 16% growth during that time. Aluminum-can shortages, higher transportation costs and a stronger U.S. dollar bit into profits and margins, the company noted in its Q3 results in early November. But Monster says it's already seeing supply challenges and aluminum prices easing, according to the quarterly report.
And analysts expect Monster to buck the negative earnings trend with its Q4 results in early March. Wall Street sees consistent earnings and revenue growth throughout 2023. Earnings are expected to grow an average 27% over the next five quarters, with revenue averaging 11.6% gains over the year.
The company's board of directors approved a $500 million stock repurchase program at the beginning of November.
Monster Stock Ratings
Monster Beverage ranks third in the Non-Alcoholic Beverages Group according to IBD Stock Checkup. It trails Coca-Cola Europacific Partners and Coca-Cola Femsa SAB, which are the U.K.- and Mexico-based bottling companies for Coca-Cola.
Monster's relative strength line hit new highs at the turn of the year. It currently has an 84 RS Rating out of 99, as it's outperformed most of its peers over the past 52 weeks. Shares have a 65 EPS Rating due to the decline in earnings.
But the number of funds holding MNST stock rose to 1,865 in December from 1848 in September, indicating growing institutional support. Still, the total number of funds holding MNST is down from its June peak of 1,883.
MNST stock has a 90 Composite Rating out of a best-possible 99, which combines a number of technical indicators into one score.
MNST Stock Analysis
MNST stock is trading in a flat base as part of its base-on-base formation. Shares broke out of a 13-week flat base in early November and rose 6% before shaping the current pattern at the beginning of December.
MNST stock is clearing short-term highs and the bulk of the base, which presents an early entry point of 103.25. The stock briefly overtook that entry on a rebound from its 50-day moving average. The overall pattern has an official buy point of 104.75, according to MarketSmith. The buy zone, which extends 5% beyond the buy point, tops out at 109.99.
MNST stock is up more than 15% over the past three months.
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