Critical Of Monster's Valuation, Citron Anticipates A Drop To $80

In an emphatic report Friday, Citron Research boasts on Monster Beverage Corporation MNST, "MNST has continued to defy gravity— as if the stock drank four cans of its own product."

Among Monster's achievements, Citron highlighted its pricing power: "The bear case thesis on Monster has been around for years. It used to focus on the headwinds of the energy drink business and the health risks of the product. All the while the price of MNST has continued to defy gravity."

Citing engorged valuation (up 500 percent over the past five years) and revenue increases of 90 percent in the same period, Citron expressed its outlook on the stock, imploring investors to "consider the real facts surrounding the business, and consider the price of the stock within the perspective of current market conditions."

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Placing the beverage company within the context of its sector, Citron called Monster's track record "utterly ridiculous [emphasis omitted]" and elaborated, "Monster's valuations disconnect with reality, demonstrating why Monster will trade down to $80."

A Few Positive Metrics Isn't The Whole Story

Citron emphasized that while growth has continued for Monster, it's slowing down. Furthermore, while the stock price has increased, the risks have not disappeared, but have stealthily grown.

"Citron is not going to dedicate too much time going over the danger of energy drinks – the risk is self-evident and something that the bulls and bears can probably agree on," the company began, relaying three stories from late 2015 into early 2016 about the risks of the company and the stock's lack of appropriate reaction. "This [the stories] illustrates that just because the risk has been acknowledged does not mean it has gone away…or priced in," Citron retorted.

The Bottom Line

Citron concluded its report by anticipating Monster would trade down to $80 in the short term, "Citron is not saying that Monster misses its next quarter, necessarily. We're not even stating that the company's business isn't successful or valuable. We are just saying that it will never grow into its valuation."

Monster is experiencing a 4.56 percent fall on the week and was recently seen trading down 2.47 percent at $133.82.