Monster Beverage Upgraded at JPM On ‘Attractive Narrative’ into 2023 By

© Reuters. Monster Beverage (MNST) Upgraded at JPM On ‘Attractive Narrative’ into 2023

By Sam Boughedda

Monster Beverage (NASDAQ:) was upgraded to Overweight from Neutral, with its price target increased by $10 to $106 per share by JPMorgan analysts on Tuesday.

The analysts told investors in a note that the upgrade is based on the company’s attractive narrative into 2023 while its organic/EPS growth is re-energized.

“We think MNST is well positioned into 2023E from both organic top-line (JPMe: 11%) and bottom-line perspectives (JPMe: +31%). Profitability will likely remain subdued in Q322 and Q422, but with aluminum costs alleviating and more efficient logistics back to clusters, we think the glass is half full ahead,” said the analysts.

While JPMorgan acknowledged the risk of inflation deteriorating demand and more entrants to the category, the analysts added that consensus estimates seem low.

“In the short term, we are cognizant that there is some uncertainty and debate on where 3Q22 gross margins will land following successive negative surprises over the past few quarters and timing of flow-through given elevated balance sheet inventory, but we think it is backward looking (MNST reports 3Q22 results this Thursday November 3 AMC). Looking ahead, we feel comfortable that the drivers are in place for margin progression, including incremental pricing actions in US/EMEA that will flow through more fully in 4Q and abating commodity/transportation cost headwinds (although to be fair, some margin pressures may prove sticky),” the analysts explained.

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