Price Increases Starting To Prop Up Monster’s Margins; Long-Term Outlook Remains Intact

Our $83 per-share valuation of narrow-moat Monster Beverage should not change materially in response to its third-quarter earnings announcement, which included 15% sales growth. The company continues to face cost challenges with respect to ingredients and aluminum cans, but recent price increases are improving the margin picture. We see inflationary pressure as transitory, and still expect mid- to high-single-digit percentage annual sales growth and low- to mid-30s operating margins in the long term. We suggest investors seek a more attractive entry point.