MNST

Publicly traded companies mentioned herein: Anheuser-Busch InBev SA/NV (ABI BB; BUD), Coca-Cola Co/The (KO), Monster Beverage Corp (MNST), Nielsen Holdings PLC (NLSN), PepsiCo Inc (PEP)

Highlights

The presenter is long shares of Monster Beverage Corp (MNST), which he believes to be mispriced due to challenges that have driven market sentiment down over the past few years, including increased competition from VPX’s Bang energy drink and Red Bull. Monster has been facing margin pressure and there is an overarching narrative that it is losing market share; this combination has deflated MNST’s P/E multiple. Shares are currently trading at ~$62, or just under 30x the Street’s 2019 EPS estimate. This multiple is ~1.8x the S&P 500 multiple, roughly 1 standard deviation below its historically normalized ~2x market multiple. Prior to negative EBITDA revisions over the past couple years, MNST was trading at 2.2x – 2.4x the market multiple. In the next 12 months, the presenter thinks margins will improve and the declining market share narrative, which he views as misinterpreted, will dissipate. At that point, he expects MNST’s P/E multiple to improve to 2x+ the market multiple, and the share price to increase ~29% to ~$80 on his $2.50 2020 EPS estimate.