Following the news of a 16.7 percent stake taken by Coca Cola KO in Monster Beverage MNST, several houses have issued reports. Below are the updated rating and price targets with analyst comments.
Citigroup: Neutral, 93 target price.
"We have a Neutral rating on shares of Monster Beverage. We believe in MNST as a
long-term growth story given a combination of factors, including (i) its consistently
improving market share trends; (ii) the distribution expansion opportunities that exist
for MNST outside the U.S.; (iii) the company's solid cash flow generation, which
should enable it to fund further share repurchases, thereby boosting EPS; and (iv)
the potential for MNST to be acquired by a larger player. However, we feel that the
stock's current valuation appears full, as investors are already discounting much of
MNST's future growth potential."
Jefferies: Hold, 95 target price.
"We downgrade MNST to Hold following the KO announcement, for the
following three reasons: (i) strategic potential is now less of a catalyst; (ii)
valuation looks full at 16.5x CY15E EV/EBITDA; and (iii) the bar is now higher
for the stock and global industry slowing remains a key risk factor. We still view
the alliance with KO as a win-win, but see significantly less stock upside over
the next 12 months. Adj. FY15-16E EPS to reflect deal, PT goes to $95."
Credit Suisse: Outperform, 98 price target.
"MNST management provided more detail regarding the strategic partnership
with KO. The transaction should bring several benefits, including stronger
growth (particularly outside the US), faster margin expansion and greater
management focus. We are raising our target price to $98 from $82. For now,
we assume that MNST return most of the cash received to shareholders over
the course of FY15 and FY16 which would offset the dilution from the newly
issued stock in FY15 and would be EPS accretive by $0.12 in FY16. Once
MNST provide more clarity about the timing and magnitude of the suggested
cash returns, we will update our model accordingly. "
Shares of Monster closed lower by 5.40 percent at 88.44.
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