Why Monster Beverage's 10% Decline Makes It The Perfect Time To Buy

In a report published Thursday, Morgan Stanley analyst Dara Mohsenian upgraded the rating on Monster Beverage Corporation MNST to Overweight, with a price target of $160, on expectations of an increase in the company's earnings. Monster Beverage's shares declined 10 percent from the recent highs, following the absence of a share repurchases announcement after the deal with The Coca-Cola Co KO and weaker-than-expected 2Q results. "However, we view these issues as transitory as we still expect MNST will eventually pursue repurchases with its ~$3B pro-forma cash balance post the KO deal, although we have pushed back the starting point for repurchases to Q4 from Q3," , analyst Dara Mohsenian said. Mohsenian noted that the company's 3Q top line miss versus the consensus was "transitory," related to lower Coca-Cola system inventory and higher out of stocks in the US, "which should now be mostly resolved," and internationally, less focus from distributors where Monster Beverage may transition to the Coca-Cola system, "which should be alleviated when the territories switch distribution hands." The company appeared poised to benefit from significant acceleration in international sales, driven by the Coca-Cola deal and margin expansion from local production. Mohsenian believes that Monster Beverage's shares did not reflect the company's strong long-term EPS growth opportunity.