In the Spotlight - A Monster of a Week
Monster has enjoyed something of a rollercoaster week
Despite unveiling a strong set of first-half results, this may be a week that Monster Beverage Corp will want to forget.
The California-based energy drinks firm reported a 33.5% rise in H1 net profits to US$185.9m on Wednesday, helped by a 28% rise in sales. CEO & chairman Rodney Sacks also talked encouragingly about launches into more international markets.
So, high-fives all round, it would appear. But, the first dent in Monster's armour came after its shares dived 19% to $55.38 per share in after-hours trading, as its earnings missed estimates. As we reported, analysts Stifel Nicolaus suggested this should not be a cause of long-term concern.
Others seemed less convinced. Forbes noted that analysts expect Monster to maintain fast-paced growth this year and next. But it added: "Monster shares may fall further, though, because of increasingly difficult year-over-year comparisons."
It also raised concerns over the group's future overseas expansion claiming it is a "risky gamble, given the uncertainty in Europe and growing weakness in Asia".
Quoting analyst Caroline Levy of Credit Agricole, Forbes said: "Distribution contracts remain an issue in Australia and Central and Eastern Europe, while its Brazilian distributor is having trouble adjusting to that market’s scale."
Forbes concluded: "Monster’s rampage may be nearing its end".
Meanwhile, the Wall Street Journal also speculated that the company's best-growth days could be "in the rearview mirror".
Away from its financial performance, the group is also facing a headache over potential legal action against it flagship energy drink. The firm revealed yesterday that it has recieved a subpoena from an unnamed US state attorney general. Details were scarce and Monster appears to have put up the PR shutters on the issue, but this couldn't stop its share price taking another hit. Meanwhile, Bloomberg could not get a peep out of the California Justice Department.
The subpoena could be a temporary diversion. But, as we reported, one analyst believes there could be other drinks companies involved, amid concerns around caffeine levels in energy drinks.
And to complete the hoary hat-trick, Monster's name caught the headlines in the likes of Variety, after it emerged this week that US hip-hop band the Beastie Boys have launched a copyright claim against the firm.
What Monster's long-time suitors, the Coca-Cola Co, will make of all this is anyone's guess. Perhaps a chance for a cheeky low bid?
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