http://www.businessweek.com/ap/2013-05-14/...rage-gains-some-traction
NEW YORK (AP) — Monster Beverage shares are gaining some traction less than a week after the energy drink maker reported disappointing first-quarter results and a slowdown in sales.
THE SPARK: Last Wednesday, Monster Beverage Corp. said that its quarterly profit fell as it was hurt by distributor termination obligations, foreign currency exchange rates and legal costs tied to regulatory matters and litigation regarding its namesake drink.
The Corona, Calif., company reported earnings of 37 cents per share and revenue of $484.2 million. Analysts polled by FactSet expected earnings of 46 cents per share on revenue of $502.2 million.
The lackluster quarterly results had the stock falling last week. Now the stock price is providing a buying opportunity for investors.
THE BACKGROUND: Monster and other energy drink makers are facing increased scrutiny over the caffeine levels in their drinks and their marketing practices. New York's attorney general has subpoenaed companies including Monster. The Food and Drug Administration is investigating reports of deaths and adverse health effects of energy drinks, although the agency has noted that the reports do not necessarily mean the drinks cause the deaths or injuries.
Last week San Francisco's city attorney sued Monster, saying the beverage company markets to kids as young as six years old. The company had sued the city the previous week over its demands that Monster reduce caffeine levels and adjust its marketing practices.
Monster has repeatedly stood by the safety of its drink.
THE ANALYSIS: Dara Mohsenian of Morgan Stanley started Monster Beverage with an "Overweight" rating, saying the stock price doesn't fully account for its strong growth potential. In a client note, the analyst said that the regulatory and legal concerns are overblown and that there is ample opportunity for the company to increase its U.S. sales as health concerns and other issues wane going forward.
Mohsenian also says that Monster Beverage still has room to grow abroad as well, predicting a 20 percent revenue increase overseas over the next five years.
A representative for the company did not immediately respond to an email seeking comment.
SHARE ACTION: Monster Beverage's stock climbed $2.75, or 5.1 percent, to $56.58 in afternoon trading on Tuesday. The shares have traded in a 52-week range of $39.99 to $79. For the year to date, the stock is up 2 percent.