Monster Beverage Earnings: Pricing Power Seems Intact as Firm Benefits From Hikes; Shares Not Cheap

Our $43 per share valuation of narrow-moat Monster Beverage should rise by a mid-single-digit percentage, largely reflecting the time value of money after the company posted first-quarter earnings that suggest it is on pace to meet our full-year targets. The company saw sales and profitability improve in the wake of recent pricing actions taken to cover rising costs with little impact to market share, a dynamic that suggests the pricing power underlying our moat rating is intact. Despite our favorable view of the company’s competitive position, we believe the shares are priced such that they assume perfect execution (particularly challenging considering that Monster is increasingly dependent on less established markets and product lines for growth).