Monster Beverage’s strong growth prospects likely priced in

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Piper Sandler started coverage of Monster Beverage (NASDAQ:MNST) on Thursday with a Neutral rating, advising clients that the current valuation accounts for much of the expected earnings growth ahead.

The firm's team indicated that a solid core brand and "strong innovation pipeline in both energy drinks and alcohol" to drive sales while gross margins should recover as cost-inflation eases. However, the path for EPS and sales growth are balanced by a lofty valuation at present, in their view.

"We believe MNST will continue to deliver strong top-line growth and drive gross margin recovery. However, given current valuation and a multiple well above its historical average, we see only modest likely upside to the shares near-term and remain on the sidelines for now," the team concluded. "In the energy drink category, we prefer [Celsius Holdings’] (CELH) outsized near-term growth relative to its valuation."

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