Why Monster Energy Skyrocketed Today

Shares of Monster Beverage (Nasdaq: MNST  ) soared higher today after the Food and Drug Administration released a letter addressing health concerns related to energy drinks like those sold by Monster. Earlier this year ,the FDA launched an investigation into the safety of such beverages following the death of a 14-year old girl who died after allegedly drinking Monster energy.

As it stands, Monster drinks have been tied to five deaths. Report data from the FDA also outlines multiple cases involving hospitalization after the person in question consumed Monster energy. However, according to the FDA review released today, they found no problems with the two primary additives, taurine and guarana, in Monster energy .

The report also explains, "There is no certainty that a reported adverse event can be attributed to a particular product or ingredient." The market reacted favorably to the report, with the stock rising more than 14% this afternoon to $52 a share. Year to date, shares are down less than 1%.

While the FDA has not reached any final decisions, a likely outcome would be increased regulation on these products. That said, the FDA only has regulatory power over food and drugs. And since highly caffeinated products such as those from Monster energy are considered nutritional supplements, it isn't likely that the FDA's involvement will have any lasting affects on the company.

Consider, too, that the 24-ounce Monster energy drink the 14-year old girl drank contained 240 mg of caffeine. That's significantly less than the 415 mg of caffeine in a 20- to 24-ounce cup of Starbucks (Nasdaq: SBUX  ) coffee. And the java giant still sells billions of dollars' worth of its coffee beverages each year.

Today, Monster Beverage is the second largest energy drink producer behind Red Bull, and I don't see that changing because of the company's recent run-in with negative press.

The stakes are high for Monster Beverage these days. The stock had been nothing short of a rocket, but recent developments have sent shares spiraling downward. Health scares sparked a number of investigations at the state and federal level into the energy drink's role in several fatalities. With the company's value slashed in half, investors are wondering whether Monster Beverage is a value or a bust in the fast-growing energy-drink category. Find out now in our brand-new premium research report, which details all the ins and outs you need to know about Monster Beverage, and even comes with a full year of updates to boot. Click here now to claim your copy and start reading today.

 

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9/29/2014 3:59 PM
MNST $91.33 Up +0.80 +0.88%
Monster Beverage CAPS Rating: ***
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Starbucks CAPS Rating: ****

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