Why Monster Beverage Shares Continue to Fizzle Out

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  ) continued their slide for the second straight day, down as much as 12%, following negative news from the FDA and Goldman Sachs.

So what: One factor driving the maker of Monster Energy lower is the fact that Goldman Sachs removed Monster Beverage from its "conviction buy" list. That was perpetuated by confirmation today that the Food and Drug Administration is investigating reports of deaths associated with consumers who drank Monster Energy. The scope of the FDA's investigation dates back to 2004 and will focus on the safety of the highly caffeinated energy drink. Monster Beverage denies all allegations that its energy drink is responsible for consumers' deaths.

Now what: It's almost like you can smell the lawyers hovering like vultures waiting to pounce on their prey. The lawsuit that provided the impetus for this drop could be the Pandora's box that places energy-drink makers under increasing scrutiny, eventually leading to some form of FDA regulation and/or warning label on the product. This is a fear I've had for months now and is a primary reason I've avoided Monster Beverage. Until we get better clarity on the scope of the FDA's findings, I feel Monster is off-limits.

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.

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

Motley Fool newsletter services have recommended buying shares of Monster Beverage and Goldman Sachs. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (6) | Recommend This Article (1)

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  • Report this Comment On October 23, 2012, at 3:53 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

  • Report this Comment On October 23, 2012, at 4:04 PM, TechNow wrote:

    5 days ago it was $58 1/2 ... Really

    So the company lost almost $3 Billion in value because of this...laughable...

  • Report this Comment On October 23, 2012, at 4:22 PM, beefangusbeef wrote:

    Panic pricing based on frivolous lawsuits. Not very foolish.

  • Report this Comment On October 23, 2012, at 4:30 PM, MeBeWeeble wrote:

    i will be very suprised if the FDA makes a ruling on this they have bailed before not wanting to open a huge can of worms. its not just energy drinks its the 32oz cup of premium coffee also that packs a wopping 600MG of Caf.

    Unfortunatlly this is America where nobody is responsible for their own actions and a big company in front of a jury always loses becaues they can afford to pay. Just ask any drug company!

  • Report this Comment On October 23, 2012, at 5:18 PM, earlyseller wrote:

    When teenagers (main Monster consumers) are dying after possible caffein overdose, I ain't putting my $ in that profit eater. When IMAX got lost in the 3D overdose and movie disinterest, I took some profit at $35 and left completely at the $25 area. I won't venture into Monster with title of "Killer of Kids" flying in the wind. Halloween is scary enough for me with just a sugar high. As far as the wonderful FDA is concerned, NECC is an F- in their report card.

  • Report this Comment On October 24, 2012, at 11:51 AM, MeBeWeeble wrote:

    A teenager. and its tragic. with a known heart condition? Im sure her cardiologist told her and her parents she should avoid any stimulants probably even mentioned Coffee, tea, energy drinks? if he didnt they probably should go after his money next. How many kids die each year by eating just 1 peanut? 10,000 hospitalized and near 200 deaths and the FDA makes them put on a warning Product contains peanuts on a jar of nuts silly!

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