Monster Stock Could Be a Scary Pick for Bulls Next Month

The stock suffered a post-earnings bear gap earlier in August

Digital Content Manager
Aug 31, 2022 at 12:47 PM
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Monster Beverage Corp (NASDAQ:MNST) hasn't been spared by the market's recent selloff. Shortly after the equity touched an annual high of $99.81 in late July, MNST was hit with a brutal post-earnings bear gap. Layers of resistance have formed near the $92 area and 20-day moving average, keeping Monster stock from closing this gap. This could be just the tip of the iceberg for the beverage name, however, as the stock just landed at the top of Schaeffer's Senior Quantitative Analyst Rocky White's list of the 25 worst stocks to own in September, going back 10 years. 

mnst aug 31

According to White's data, the equity has seen negative one-month returns 90% of the time, averaging a 4% loss during this time period. This is good for the third largest monthly loss on the list, and makes Monster stock the only name to see monthly losses nine times out of ten. From its current perch, a move of similar magnitude would put MNST just above the $85 level -- a region it hasn't touched since mid-June. 

The security was bombarded with bear notes following its second-quarter profit miss, but there's room for even more downgrades. Of the 14 in coverage, eight consider the stock a "buy" or better, without a single "sell" rating on the books. Plus, the 12-month consensus price target of $101.06 is a 13.4% premium to current levels, sitting just above its aforementioned annual peak.

Options traders, on the other hand, have been piling on their bearish bets. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), MNST sports a 10-day put/call volume ratio of 1.12, which stands higher than 76% of annual readings. This implies puts are being picked up at a quicker-than-usual clip. 

With that said, joining these traders could be a prudent play. The equity's Schaeffer's Volatility Index (SVI) of 27% sits higher than just 31% of readings from the past year. In other words, options traders are pricing in relatively low volatility expectations for Monster stock at the moment. 

 

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