On Tuesday, June 16, Citigroup Inc. (NYSE/C) added the Monster Beverage Corporation (NASDAQ/MNST) to its ‘Focus List,’ calling the energy drink company its “top [stock] pick” in the U.S.
Citigroup maintained its “buy” rating on the company, upping its target price to $155.00. As a result, Monster jumped nearly four percent at the open.
Citigroup cited a number of catalysts that could send shares higher over the next 12 months. Earlier this week, The Coca-Cola Company (NYSE/KO) closed its $2.15 billion purchase of a 16.7% stake in the company. A statement from Coca-Cola said that, as part of the deal, it would transfer its worldwide energy business to Monster. (Source: The Coca-Cola Company, last accessed June 16, 2015.)
Also, analysts in Citigroup are expecting enormous sales and earnings growth over the next five years from the energy drink maker. Citigroup added that it sees “considerable upside” to the stock from its current levels.
According to Citigroup’s updates, distribution transition is expected to stabilize in the U.S. and is a potential sign of entering into new markets like China and Brazil. Analysts also foresee a potential impact of new product launches.
Monster is based in Corona, California. As a holding company, it conducts no operating business except through its consolidated subsidiaries. (Source: Monster Beverage Corporation, last accessed June 16, 2015.)
Monster has no debt, resulting in a debt-to-equity ratio of zero, which could be a relatively favorable sign. Moreover, the firm has a quick ratio of 2.47, which refers to how liquid the company is to cover its short-term financial obligations.
According to their financials, in year-to-year figures, the revenues slightly increased by 9.5% while the revenue growth came in higher than the industry average of 5.2%.
Compared to its stock price one year ago, it has jumped by nearly 80%, exceeding the performance of the broader market during the same period. However, the net income has significantly decreased by 95.4% when compared to the same quarter one year ago, falling from $95.25 million to $4.41 million.
For investors, analysts foresee significant sales and earnings growth over the next five years. However, they remain cautious on how the company will plan to increase its net income.