Analyst Note| Nicholas Johnson, CFA |
Robust growth in syndicated energy drink data, speculation around a potential foray into alcoholic seltzer, and a plethora of sell-side bulls all catapulted narrow-moat Monster’s stock to new highs in the months leading up to its fourth-quarter earnings print. Ultimately, the firm’s execution remains undaunted by pandemic disruption, as it delivered a record quarter ahead of FactSet consensus on both the top and bottom lines (though the latter was largely due to a nonrecurring tax benefit). We plan to raise our $67 fair value estimate by a high-single-digit percentage to reflect time value after rolling our model, as well as elevated near-term sales momentum. In our view, however, current valuation levels still border on untenable, given the rosy assumptions necessary to justify them.