Monster Beverage Stock Crashes Despite Earnings Beat

MNST shares had already underperformed in 2018

Nov 8, 2018 at 9:15 AM
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Monster Beverage Corp (NASDAQ:MNST) is trading down 10.4% in pre-market activity, even though the company reported better-than-expected earnings for the third quarter. Traders could be reacting to weak margins for the period, on top of surprising news about business partner Coca-Cola (KO), which sparked a downgrade from Morgan Stanley. That is, the brokerage firm downgraded MNST stock to "equal weight" from "overweight" and lowered its price target to $57 from $69.

This downgrade came after Monster noted that Coca-Cola is launching two energy drinks it views as competitors, and that it's challenging this decision through arbitration. For their part, Morgan Stanley expected Coca-Cola to make a meaningful push into the energy drink market. That wasn't the only negative analyst note to come through on the security today. Wells Fargo also cut its price target, dropping it to $55 from $58. On the other hand, Susquehanna upped its own price target to $46 from $44.

Most analysts are bullish on MNST stock. There are 13 brokerage firms in coverage on the security, and eight of them have "strong buy" recommendations right now. Meanwhile, the average 12-month price target is up at $64.18, which represented a nearly 15% premium to last night's close of $55.91.

On the other hand, there was plenty of skepticism among options traders before the quarterly event. For one, the 10-day put/call volume ratio at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) is 1.14, and ranks in the 91st annual percentile, revealing unusual demand for long puts.

In a similar vein, the Schaeffer's put/call open interest ratio (SOIR) comes in at 1.11, showing put open interest outweighs call open interest among contracts expiring within three months. Moreover, this ranks in the 96th annual percentile, showing this is a rare put-heavy level for the indicator.

For the record, short interest has been rising, too, jumping 15.1% in the last reporting period. Yet just 1.8% of the total float is held by short sellers, meaning there's theoretically room for more short sellers to move in. MNST stock was already down almost 12% year-to-date coming into today.

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