Monster Beverage Gets Boost to Overweight From Morgan Stanley

A Morgan Stanley analyst raises his share price target on Monster Beverage to $90 from $87.
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Monster Beverage  (MNST) - Get Report got a lift from a Morgan Stanley analyst who upgraded the maker of energy drinks to overweight from equal-weight two days before the company reports quarterly results.

Shares of the Corona, Calif.-based company were climbing 1.08% to $78.76.

Analyst Dara Mohsenian, who also raised his share price target to $90 from $87, said in a note to investors that the market isn't “appropriately pricing in Monster’s growth potential.”

"Energy drink category and Monster US sales growth appear to be rebounding solidly in Q3and Q4-to-date after Covid weakness in Q2," the analyst said. "We also see potential for MNST share gains in 2021 with a strong potential innovation pipeline, including a hard seltzer launch, which alone could add a couple hundred bps to total sales growth."

Monster Beverage is scheduled to report third-quarter earnings after the market closes on Thursday. Analysts surveyed by FactSet are expecting earnings of 63 cents a share on revenue of $1.22 billion.

In addition to rebounding U.S. top-line growth, Mohsenian said he has "confidence in near-term international topline momentum based on recent strength in reported results (ex a Covid impacted Q2) and rebounding European scanner data trends."

The analyst also upgraded the beverage industry to attractive from in-line. 

Mohsenian said recent "stock underperformance around temporary COVID driven demand weakness offers an attractive entry point into a sector with a superior long-term topline and EPS growth outlook," compared with its peers in consumer packaged goods, as well as a short-term expected rebound in organic sales growth.

"Longer-term, ex-Covid, we see higher growth in beverages, driven by structurally superior pricing dynamics with greater channel diversity in beverages, higher immediate consumption, lower private label penetration,and a more concentrated market share position," the analyst said.