November 8, 2012
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 ) went into withdrawal this morning, falling as much as 11% on its earnings report before recovering to finish the day down just 1.2%.
So what: Earnings per share of $0.47 cents was well short of estimates of $0.55 cents, while revenues grew just 14%, about half the pace we've seen in the three previous quarters. CEO Rodney Sacks said that monthly sales were volatile and, in October, the first month of the fourth quarter, gross sales actually increased 28%. The recent FDA investigation into the safety of Monster's Energy drinks have also weighed in the stock recently, pushing shares down to nearly half their value from its high this summer near $80, though Sacks called the allegations "baseless."
Now what: Investors apparently saw the initial drop as a buying opportunity, as shares of the beverage company had not been that cheap in over a year. Still, net income in the quarter grew just 4% in the quarter, as promotional sales ate into margins, and investors should be concerned about the shrinking revenue growth. The fourth quarter should tell if this was just an anomaly, but I think this high-flying growth story might be coming to an end.
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