Monster Beverage Earnings: Innovation, International Markets Fuel Growth; Pricing Discipline Intact

We plan to raise our $50 fair value estimate for narrow-moat Monster Beverage by a mid-single-digit percentage to account for strong 2023 results and the time value of money. Increases of 13.1% for revenue and 38.0% for earnings per share in 2023 outpaced our estimates of 12.8% and 34.6% on strong volume expansion and better-than-expected margin gain, reaffirming our confidence in Monster's long-term outlook underpinned by strong brands and the long-term partnership with Coca-Cola. In the coming years, we expect innovations (zero-sugar recipes, new fruit flavors, variety packs, and slim packaging) will continue to drive the bulk of growth in the US. Meanwhile, the firm has multiple levers to pull internationally, including new products, wider distribution, and the rollout of affordable brands Predator and Fury to tap energy drink consumers across emerging markets. Our 10-year projections for high-single-digit annual sales growth and operating margin averaging in the low 30s remain in place. We view the shares, which popped 5% in after-hours trading, as overvalued.