Monster Beverage Bounces Back Following Disappointing Earnings
Shares of Monster Beverage (NASDAQ: MNST) traded lower on Thursday, following the company's release of disappointing earnings results for the third quarter.
Monster reported net income of $0.47 per share, an increase from last year's $0.44 per share. Yet, analysts on Wall Street were expecting a much higher figure -- $0.55. Sales came in at $541.9 million, up from last year's $474.7 million, but missing the Street's $578.48 million estimate by a significant amount.
Despite the sell off early Thursday, shares had actually recovered significantly from where they were trading in Wednesday's after-hours session. Monster was down over 14 percent at one point Wednesday afternoon, trading in the $30 range. Early Thursday, shares were only down a little more than three percent.
Monster Energy has been an interesting stock for traders in recent months. Shares have run up significantly since early 2011, becoming a favorite of momentum traders. The company's sales have grown dramatically, as Monster has expanded its offerings and energy drinks have grown in popularity. Those looking to get exposure to that secular trend (the growth of energy drinks) have had little choice but to buy Monster's stock. Major competitors Red Bull and Rockstar are not publicly traded on U.S. exchanges.
Monster may have also traded with a takeover premium -- that is, soft speculation that sooner or later some other company would step up and acquire it. Coca-Cola (NYSE: KO), for example, was widely seen as a possible acquirer, as the company's efforts to enter the energy drink market had proven to be lackluster. Further, energy drinks are an industry that is growing -- something Coca-Cola's core business model has failed to do.
Back in May, Monster's stock was halted after the Wall Street Journal reported that Coca-Cola had talks with Monster on acquiring the company. Later, Coca-Cola said it would not acquire Monster, which lead to the move rapidly reversing.
Then, more recently, shares have been hammered by various reports and speculation about the company being investigated by the FDA. Reportedly, five people had died of heart complications after consuming large amounts of Monster's energy drink.
Compared to the deaths caused by cigarettes and alcohol, five is a relatively miniscule number. Yet, those who dumped their shares on these reports must have felt vindicated on Thursday, as they managed to take profits ahead of a disappointing quarter.
Shares of Monster Beverage traded near $43.30 on Thursday morning, down about 3.50 percent on the session.
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