Monster Beverage Earnings: Innovation and Value Brands Fuel Top Line; Volume Upside From Bang Deal

We plan to maintain our $48 fair value estimate for narrow-moat Monster Beverage after absorbing second-quarter results that matched our estimates. Sales grew 12% (or 14% on a currency-neutral basis) and EPS rose 50%, keeping the firm on track to meet our 2023 targets for sales and EPS to grow 13% and 31%, respectively. We see no reason to alter our 10-year projections for high-single-digit annual sales growth and operating margin averaging 32%. Despite our constructive view of Monster’s long-term prospects, anchored by brand intangibles and the long-term partnership with wide-moat Coca-Cola, we see the shares as expensive, trading at a 17% premium to our intrinsic valuation.