UPDATE: Citigroup Reiterates Neutral Rating, Raises PT on Monster Beverage Corp.
In a report published Wednesday, Citigroup reiterated its Neutral rating on Monster Beverage Corp. (NASDAQ: MNST), and raised its price target from $48.00 to $60.00.
Citigroup noted, “MNST's outsized revenue growth – both past and future, we suspect – makes it unique among its peers. That said, we think MNST's 3Q results showed us that the company's growth may not be as predictable or as consistent as some investors had grown to expect. With this in mind, and assuming the acquisition premium that had been in this stock is now gone, we have a hard time seeing MNST return to its peak multiple (in the high 20's as a multiple of year-forward earnings). We instead think a fair valuation for the stock today is 25x year-forward earnings. While the recent buyback activity (6.9 mm shares repo'd in 3Q12 and another 6.1 mm shares repo'd so far in 4Q12) could at least cushion, if not boost EPS next year, we wonder if the aggressive pace of new market expansion (which endeavors are usually margin-dilutive initially) might not offset this benefit from share repo's. As such, we maintain our 2013 EPS estimate of $2.40 (+25% YoY), but raise our price target to $60. As this represents only ~10% upside from current levels, we maintain our Neutral rating.”
Monster Beverage Corp. closed on Tuesday at $54.91.
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