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Price: $45.64
Discount category: Far above intrinsic value
Next earnings: 2027-02-25
Next earnings is estimate: Yes
Company name: Monster Beverage
Sector: Beverages
About: Monster Beverage develops and markets energy drinks. Its main brands are Monster Energy, Reign, Bang, Burn, NOS, Full Throttle, Predator and Fury. It also sells craft beers, flavored malt drinks and hard seltzers through a small Alcohol Brands segment. Bottlers of The Coca-Cola Company make and distribute most of its drinks: in Q3 2026, Coca-Cola Europacific Partners gave about 17% of net sales and Coca-Cola Consolidated about 9%. In Q3 2026, net sales were $2.56 billion, and sales outside the United States were 47% of the total. The company is based in Corona, California. Hilton H. Schlosberg is its chief executive officer. It made a two-for-one stock split on August 10, 2026.
Thesis: Monster trades at a premium because investors pay for a long record of fast growth, a strong brand and a balance sheet with no debt. In the first nine months of 2026, net sales rose 20.9% and sales outside the United States rose 35.2%. Monster had $4.63 billion of cash and investments at September 30, 2026. For the premium to be earned, three things must be true. Net sales must keep growing in the mid-teens, as in Q3 2026, when they rose 16.7%. The gross margin must stay near 55% while aluminum and freight costs rise; it fell to 54.7% in Q3 2026 from 55.7%. Operating expenses must grow more slowly than sales; in Q3 2026 they grew faster, and operating income rose only 6.4%. The premium can shrink if growth slows in the United States, if new rules limit energy drink sales, or if price increases do not cover cost increases. The Q4 2026 report, expected in late February 2027, is the next test.
Risks: Growth slowed in Q3 2026. Net sales growth fell to 16.7% from 26.9% in Q1 2026, and operating income rose only 6.4% because marketing and freight costs grew faster than sales. If this trend continues, profit grows more slowly than sales. Aluminum can and freight costs rose in 2026 and lowered the gross margin to 54.7% in Q3 2026. Tariffs and the Midwest aluminum premium can raise costs more. Price increases may not cover them. Governments can limit energy drinks. The company names possible rules on sales to some age groups, on container sizes, on purchases with SNAP benefits and on some ingredients. Such rules can cut sales. Monster depends on the bottlers of The Coca-Cola Company to distribute its drinks. Two of them gave about 26% of Q3 2026 net sales. A change in this relationship, or less shelf space for Monster, can cut sales. Competition in energy drinks is strong. New brands and large beverage companies sell competing drinks, and this can lower prices or market share.
Balance sheet: Cash: $3.7B Debt: $0.0M Net cash: $3.7B Undrawn credit line: $500M, to May 2029 Monster has no debt. At September 30, 2026, it had cash and cash equivalents of $2.15 billion, short-term investments of $1.56 billion and long-term investments of $927 million, a total of $4.63 billion. A $500 million revolving credit facility runs to May 2029 and had no borrowings at September 30, 2026. Cash from operations was $1.67 billion in the first nine months of 2026, and purchases of property and equipment were $101 million. In the same period, Monster paid $234 million for buybacks and pays no dividend. About $800 million of buyback authorization was left on November 4, 2026. There were 1,957,511,922 shares outstanding on October 30, 2026, after the stock split. As of 2026-09-30.
Checkpoints: Nov 5, 2026: Q3 2026 results: sales growth and margins. Passed. Watch: Net sales growth in the mid-teens or more with a stable gross margin passes; growth below ten percent or a falling margin fails. Outcome: Net sales rose 16.7% to a record $2.56 billion, but the gross margin fell one point and operating income rose only 6.4%. Feb 25, 2027 (estimate): Q4 2026 results: margins and US growth. Pending. Watch: Net sales growth in the mid-teens with a gross margin near 55% and operating income that grows with sales pass; slower sales or a lower margin fail.
Recent events: 2026-11-05: Monster reported Q3 2026 results. Net sales rose 16.7% to a record $2.56 billion, and sales outside the United States rose 28.1% to $1.20 billion. The gross margin fell to 54.7% from 55.7% because of higher aluminum can and freight costs. Operating income rose 6.4% to $718.7 million, and diluted EPS rose to $0.29 from $0.27. Results included a $19.9 million impairment of property in Kona, Hawaii. The company bought back 2.3 million shares for $100 million. 2026-09-25: Monster said that Rob Gehring, chief executive of the Americas, will leave on November 30, 2026, to become president of The Coca-Cola Company's North America unit. From December 1, 2026, chief strategy officer Emelie Tirre takes responsibility for the Americas and the Caribbean on an interim basis. 2026-09-03: The Board of Monster elected Matthew Burroughs as chief accounting officer and deputy chief financial officer. 2026-08-10: Monster issued a two-for-one stock split as a stock dividend. The shares started to trade at the split-adjusted price on August 11, 2026. 2026-08-06: Monster reported Q2 2026 results. Net sales rose 20.2% to $2.54 billion, and net income rose 19.6% to $584.5 million. 2026-05-07: Monster reported Q1 2026 results. Net sales rose 26.9% to $2.35 billion, and operating income rose 28.1% to $730.0 million. 2026-02-26: Monster reported Q4 2025 results. Net sales rose 17.6% to $2.13 billion. For 2025, net sales rose 10.7% to $8.29 billion and net income rose 26.3% to $1.91 billion.