Over the past 52 weeks, one of the most impressive large-cap stocks in the consumer staples sector is Monster Beverage (NASDAQ: MNST). As of the Aug. 19 close, shares are up by approximately 37% during this period. That trounces the approximately 5% total return of the Consumer Staples Select Sector SPDR Fund (NYSEARCA: XLP) and the 17% total return of the S&P 500 Index.
In this time frame, Monster is the fourth-best-performing consumer staples stock in the S&P 500. However, big-time appreciation raises a big-time question: can Monster continue outperforming going forward? We’ll seek to answer that question below.
Monster’s Sales Growth and Profitability Stage a Recovery
A key factor driving gains in Monster is the company’s inflection from decelerating revenue growth to accelerating revenue growth. The company’s growth rate fell persistently from 14% in Q4 2023 to 1% in Q3 2024, before reaccelerating to 5% in Q4 2024.
Despite seeing sales fall by over 2% in Q1 2025, the company posted a growth rate of 11% in Q2, achieving an all-time high quarterly revenue of $2.1 billion.
The company has also consistently improved its profitability toward pre-pandemic levels. In Q2, gross margins came in at 55.7%. That figure is up 210 basis points from Q2 2024, 320 basis points from Q2 2023, and 460 basis points from Q1 2022. In Q2 2022, the company’s gross margin was an outlier of 47.1%.
Prior to the pandemic, the company’s gross margin sat at around 60%.
Despite margins not returning to pre-pandemic levels, Monster posted an all-time high adjusted earnings per share of 52 cents in Q2. The company's aggressive share buyback policy, which began at the beginning of 2021, has helped drive this. Since then, the firm has spent approximately $5.2 billion on repurchases.
Still, over that period, shares have only provided a total return of around 38%, falling significantly short of the S&P 500’s 82% return.
Notably, Monster has a strong foothold in the United States and internationally. The firm’s international revenue accounted for 41% of net sales in Q1 and grew by more than 16%.
Although revenues spiked in 2023, the company’s alcohol business has been largely unsuccessful, with sales declining consistently. Still, it only makes up around 2% of the business.
Updated Price Targets Suggest Upside Is Ahead
Overall, Monster's MarketBeat-tracked consensus price target is just over $65. That figure implies less than 2% upside compared to the stock’s Aug. 19 closing price. However, investors would be remiss not to focus on price targets updated after the firm’s latest earnings release on Aug. 7.
They incorporate the latest information and indicate a materially higher upside potential. Among those updated targets, the average forecast for Monster is $69.50. That figure implies close to 9% upside in shares. This isn’t a groundbreaking figure but a relatively encouraging sign for a stock like Monster.
Shares have been rising, meaning price targets typically won’t stray too far from the actual price. Significant sell-offs will likely result in large divergences between trading prices and price targets.
Additionally, Monster operates in a mature industry: beverages. This tends to create more certainty around a stock’s value. This contrasts with stocks in the technology sector, where change is constant and the views on the competitive landscape can range widely.
Still, even in mature industries, competition is always a concern. Celsius (NASDAQ: CELH) has grown its quarterly revenues by nearly 9x from Q2 2021 to Q2 2025. Beverage giant PepsiCo’s (NASDAQ: PEP) $550 million investment in Celsius has been key, giving the company access to Pepsi’s massive distribution network. However, Monster has had a similar arrangement with its own compelling partner, Coca-Cola (NYSE: KO).
MNST: Further Energy Drink Acceleration Could Extend Rally; Long-Term Prospects Are Questionable
As of the Aug. 19 close, Monster trades at a forward price-to-earnings (P/E) ratio 32x. That essentially equals the stock’s average forward P/E over the last three years.
The stock’s maximum forward P/E over that period is around 40x. This suggests there could be room for further near-term upside if sales growth in the energy drink category continues accelerating.
However, the firm’s relative inability to meaningfully expand outside the energy drink market puts a cap on expectations in the long term. Unless that changes, it isn't easy to see the stock achieving extended outperformance.
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The article "Monster Is Re-Energized: Can the Stock's Rally Continue?" first appeared on MarketBeat.
