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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of energy-drink maker Monster Beverage (Nasdaq: MNST ) tumbled as much as 18% following news that it was being sued by the family of a 14-year-old girl who drank Monster Energy drinks and subsequently died.
So what: According to claims in the lawsuit, Monster failed to properly disclose the dangers of its product. Anais Fournier died in December 2011 from caffeine toxicity after drinking two 24-oz. cans of Monster Energy on consecutive days. In a separate press release from the family's law firm released on Friday, it noted that six deaths and 15 hospitalizations have been associated with Monster Energy since 2009.
Now what: Although this is merely one lawsuit and Monster is innocent until proven guilty, the prospect for regulatory action against energy-drink makers is a topic I've pressed upon numerous times in the past. In addition to being subject to potential industry regulations, energy-drink makers like Monster Beverage aren't priced attractively, either. Even down more than 40% from its 52-week highs, Monster is still trading at 19 times forward earnings. Similar to the tobacco industry, which faces increasing regulatory scrutiny, I see the energy-drink sector facing the same fate, and I'd consider steering clear of Monster Beverage in the meantime.
Craving more input? Start by adding Monster Beverage to your free and personalized Watchlist so you can keep up on the latest news with the company.
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Report this Comment On October 23, 2012, at 12:15 AM, ElCid16 wrote:
"Similar to the tobacco industry, which faces increasing regulatory scrutiny, I see the energy-drink sector facing the same fate"
A bullish argument, no?
Report this Comment On October 23, 2012, at 10:23 AM, Matthewuwf wrote:
I agree completely. Solid buying opportunity here. Very unlikely they can be found liable. Maybe need to tweak an ingredient here or there to "comply" with the federalies, but then so will everyone else. I don't see the energy drink market disappearing, of which they will continue to remain a key player. Good time for KO to come calling.
Report this Comment On October 23, 2012, at 3:57 PM, TechNow wrote:
Not to minimize the death of anyone but this kind of lawsuit is small financially for Monster...who has Monster like revenue....that is assuming FDA or someone can establish causation. Further, in a strange way this could make the drink more popular among some young people...I think people understand the phenomenon of which I speak.
Lastly, coming off the summer months, if Monster has a strong 3rd Q this stock sky rockets back where it should be....by the way Nov 5, just over 8 trading days away! Bring it and lets make some money....
My foolish 2-cents
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