Monster Beverage Corporation MNST, a high-profile player in the energy drink market, has encountered a notable resistance level, prompting caution among investors from a technical standpoint. MNST is trading below both the 200 and 50-day simple moving averages (SMA) for quite some time now, suggesting a bearish trend.
Currently at $51.60, MNST remains below its 200-day and 50-day SMA of $51.99 and $53.29, respectively, indicating a possible sustained downward trend.
MNST Stock's 200-Day & 50-Day Moving Average
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MNST has faced significant headwinds, underperforming the Zacks Beverages - Soft drinks industry. In the past month, MNST's shares have declined by 1%, compared to the industry's decline of 4.2%, highlighting company-specific challenges.
MNST Stock's Price Performance
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Factors Weighing on Monster Beverage Stock
Monster Beverage is facing headwinds due to several challenges impacting its financial performance and growth prospects. The energy drink category has experienced decelerated growth in the U.S. convenience channel. This trend is largely attributed to a tighter consumer spending environment affecting certain income groups and weaker overall demand.
MNST has been facing elevated expenses. In the third quarter of 2024, operating expenses increased by 9.9% year over year, driven by higher costs associated with sponsorships, endorsements, payroll and intellectual property claims. This includes a $16.7 million provision and $1.2 million in legal expenses.
Fluctuating foreign exchange rates have also hindered Monster’s performance, adding to the complexity of maintaining profitability in international markets. Monster Beverage concluded the third quarter of 2024 with cash and cash equivalents significantly lower than at the end of 2023, reflecting a notable decline in liquidity.
The company also reported a substantial shift in its financial structure, carrying long-term debt at the end of the third quarter, whereas it had no such debt at the close of the previous year. This change suggests increased reliance on external financing and raises concerns about the company's cash flow management and potential adjustments to its capital allocation strategy.
Further, general and administrative expenses, as a percentage of net sales, jumped 150 bps year over year to 12.8%. These expenses may continue to weigh on the company’s overall profitability. Its earnings lagged the Zacks Consensus Estimate and fell year over year during the last reported quarter.
Downward Earnings Estimate Revisions Signal Concerns in MNST
Reflecting the negative sentiment around Monster Beverage, the Zacks Consensus Estimate for EPS has seen downward revisions. In the past 60 days, the Zacks Consensus Estimate for earnings for 2024 has fallen by 1 cents to $1.62 per share. For 2025, the Zacks Consensus Estimate for earnings has fallen by 1 cents to $1.85. This shift indicates growing caution among analysts and highlights potential hurdles in meeting profitability expectations.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
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Can Growth Initiatives Spark a Turnaround for MNST?
While Monster Beverage’s challenges are evident, the company’s growth initiatives could play a pivotal role in reversing its recent stock woes. The company continues to drive performance through its extensive portfolio of energy drink brands, catering to diverse consumer preferences with offerings like Monster Energy, Monster Rehab, Java Monster and Monster Hydro. Innovations such as Monster Hydro Super Sport and Monster Dragon Tea further enhance its market appeal.
Final Thoughts on MNST Stock
Monster Beverage faces a critical moment as it navigates the challenges of weak technical indicators and recent stock underperformance, warranting a cautious approach for potential investors. While the company’s growth story remains compelling, the sharp decline in its share price reflects diminished investor confidence. However, its robust strategies and long-term growth potential remain encouraging. Potential investors may wait for a more opportune entry point while existing shareholders might consider holding their positions. Currently, MNST holds a Zacks Rank #3 (Hold).
Three Stocks Looking Good
We highlighted some better-ranked stocks from the broader Consumer Staples space, namely Freshpet, Inc. FRPT, Vita Coco Company COCO and Constellation Brands STZ.
Freshpet, together with its subsidiaries, manufactures, distributes and markets natural fresh meals and treats for dogs and cats, currently sporting a Zacks Rank of #1 (Strong Buy). FRPT delivered an earnings surprise of 144.5% in the last reported quarter. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Freshpet’s current fiscal year’s sales and earnings implies growth of 27.2% and 228.6%, respectively, from the year-ago reported number.
Vita Coco develops, markets and distributes coconut water products under the Vita Coco brand name in the United States, Canada, Europe, the Middle East, Africa and the Asia Pacific. The company currently has a Zacks Rank of 2 (Buy). COCO has a trailing four-quarter earnings surprise of 17.6%, on average.
The Zacks Consensus Estimate for COCO’s current financial-year sales and earnings suggests growth of 3.8% and 29.7%, respectively, from the year-ago reported figures.
Constellation Brands, together with its subsidiaries, produces, imports, markets and sells beer, wine and spirits. It currently has a Zacks Rank #2. STZ has a trailing four-quarter earnings surprise of 5.3%, on average.
The Zacks Consensus Estimate for Constellation Brands’ current financial-year sales and earnings suggests growth of 4.1% and 13.8%, respectively, from the year-ago reported numbers.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
