After a 60,000% rally, Wall Street’s top stock has gone cold


But now it’s running into serious headwinds – the stock dropped about 18 per cent in the past few weeks – as new competitors enter the $US50 billion energy-drink market. Amazon.com is selling a private-label energy drink and Coca-Cola is launching Coca-Cola Energy in Europe.

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No takeover?

The Coca-Cola product is seen as particularly notable. The company owns nearly 19 per cent of Monster, according to Bloomberg data, making it by far the largest stakeholder. It also distributes Monster products, and analysts have long speculated that the Dow component would buy Monster outright, which has a market capitalisation of nearly $US30 billion ($42 billion). But the energy launch was seen as a step away from that, particularly as it came after Coke spent $US5.1 billion buying the Costa coffee chain in August.

“I think the opportunity has passed, that Coke won’t buy them now,” said Kenneth Shea, an analyst at Bloomberg Intelligence. “Monster hit a home run when it signed Coke as a distributor, but there’s a real risk that Coke’s energy line disrupts a really strong partnership, and that it slows Monster internationally.”

Monster declined to comment.

While Amazon and Coca-Cola are dominant in their industries, the biggest competitive threat could be from Bang, an energy drink from Vital Pharma whose recent growth is widely seen as coming at the expense of Monster.

Monster is facing fresh threats in the energy drink space, with the likes of Coca-Cola and Amazon set to launch their own beverages.Credit:Bloomberg

Market share

Monster Beverage had a market share of 35.4 per cent in the energy-drink category in March, down 3.5 per cent age points from the prior year, according to all-channel IRI data. The company share for Red Bull dropped less than a per cent age point, to 38.2 per cent . Vital Pharma’s share, meanwhile, jumped from just over 1 per cent to 8.3 per cent .

Bang’s “surge in growth is from a small base, but it had to come out of something, and it looks like it came out of Monster,” Shea said.

Monster recently announced a new drink line, Reign, designed to compete with Bang, and so far analysts are divided on its potential. Some firms have affirmed their bullishness, including RBC and Credit Suisse, which recently named the company a top pick.

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But in early March, Citi removed Monster from its focus list, seeing “less room for upside” at current valuations; on Thursday, analyst Wendy Nicholson cut her price target to $US66 from $US74, expecting competition “to remain stiff in the near term.” The move followed Morgan Stanley, which cut its own target last month. Wells Fargo’s Bonnie Herzog wrote Friday that a survey of beverage retailer sentiment shows “massive declines” in Monster since November.

Monster shares last hit record levels in January 2018, and remain more than 20 per cent below that. For now, though, it retains bragging rights for the 21st Century.

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