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Stifel Analyst Sheds More Light On The Coke-Monster Relationship

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Monster Beverage Corp (NASDAQ: MNST) revealed outstanding fourth quarter results on Friday, which sent its shares soaring more than 13 percent.

Given Monster's phenomenal growth, speculation of a potential buyout from The Coca-Cola Co (NYSE: KO) continues to be discussed on the major media networks.

Mark Astrachan, an analyst with Stifel Nicolaus, was on CNBC to discuss Monster's performance and the company's relationship with Coca-Cola.

Timing Of A Deal

On when Coca-Cola could theoretically acquire Monster, Astrachan said, "I can't tell you an exact timing, but our view is that…the growth is accelerating here, the margins are leveraging and so we think those are attractive assets to Coke longer-term.

Related Link: Monster Beverage Beats Q4 Views; Coke Deal To Close In Q2

"It's obviously part of the reason why the company wanted to take a 17 percent stake in August last year. That growth is appealing."

Barriers For Coke

When asked about the barriers Coke faces in acquiring a larger stake in Monster, Astrachan replied, "Well, there's a standstill on the deal," that says Coke can't increase its stake past 25 percent.

In terms of return, he added, "the stock has doubled since the [initial 16.7 percent stake] was announced in August; it was about $71-72, now it's at $142.

"Coke's investment looks awfully good in hindsight so far."

Who Benefits: Coke Or Monster?

"I think it's relatively small from a Coke standpoint, but if you go on to a more micro level, the bottlers just love the idea of being in business with Monster," Astrachan said.

"I think there are a lot of issues previously about having two different companies with energy drink brands in the portfolio," he warned, before adding that a "one system strategy" could "make a big difference" for Coca-Cola.

Latest Ratings for KO

DateFirmActionFromTo
Mar 2017JP MorganInitiates Coverage OnNeutral
Jan 2017Wells FargoDowngradesOutperformMarket Perform
Jan 2017Goldman SachsDowngradesNeutralSell

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