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Why Monster Beverage Stock Dropped 15% in March

By John Ballard – Apr 6, 2019 at 7:43PM

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Analysts turned cautious over concerns about competition.

What happened

Shares of Monster Beverage (MNST 0.31%) lost 14.5% in value last month, according to data from S&P Global Market Intelligence.

The stock jumped 30% to start the year before cooling off in March, following a round of bearish analyst calls on the stock. 

A young man guzzles a drink from a can while poring over a pile of books on a desk.

IMAGE SOURCE: GETTY IMAGES.

So what

Monster Beverage has been a growth machine over the past 10 years, delivering a return of 756%. Demand has remained strong for the company's energy drinks, but increased competition and pricing pressure has analysts concerned about short-term sales growth. 

The shares came under pressure in the fall as Coca-Cola (KO 0.43%) announced plans to launch Coke-branded energy drinks. Coca-Cola has had a distribution agreement with Monster Beverage since 2015 in which Coca-Cola became Monster's preferred distribution partner. 

Coca-Cola's first branded energy drink will launch in Europe in April, and that seems to have investors worried about Monster's growth this year. However, one important thing investors are overlooking is that Coca-Cola owns 19% of the outstanding shares in Monster Beverage. This ownership gives Coke every incentive to see that Monster remains a growth machine.

Now what

Monster's distribution alignment with Coke's bottlers continues to "progress well," according to Monster CEO Rodney Sacks. Monster plans to expand in new international markets to keep sales momentum going. 

Despite the stock's dive last month, analysts still expect the company to grow earnings about 15% annually over the next five years. 

John Ballard has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Monster Beverage. The Motley Fool has a disclosure policy.

Stocks Mentioned

Monster Beverage Stock Quote
Monster Beverage
MNST
$101.54 (0.31%) $0.31
Coca-Cola Stock Quote
Coca-Cola
KO
$63.81 (0.43%) $0.27

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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