Monster Beverage Corporation (MNST) Earnings, M&A Hopes Bring Bulls

Monster Beverage Corp (MNST) option traders anticipate higher highs

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Published on Feb 27, 2015 at 10:58 AM
Updated on Apr 20, 2015 at 5:32 PM

Monster Beverage Corp (NASDAQ:MNST) earlier hit an all-time high of $143.90, and was last seen 12.6% higher at $140.50, as traders gawk over its fourth-quarter earnings numbers. In addition, analysts at Stifel said the stellar report "increases the likelihood of an outright acquisition" by The Coca-Cola Co (NYSE:KO). In the stock's options pits, speculators are betting on even more upside for MNST, with calls trading at 38 times what's normally seen at this point in the day, and more than doubling put volume.

Rolling up our sleeves, MNST's most popular contract today is the weekly 2/27 145-strike call, where buy-to-open activity has taken place. This contract has seen more than double the amount of contracts as the next closest option. These late-hour bulls are expecting the shares to continue their rally above $145 by today's close, when the contracts expire. Such a move would bring MNST's single-day gain to over 16%, and would make it by far the stock's biggest daily post-earnings move in at least two years.

The 145 strike isn't the only weekly contract seeing action today. Less aggressive traders are buying to open the in-the-money weekly 2/27 140-strike call, hoping for MNST to extend its run above $140.

It's not an oddity to see calls outnumbering puts in MNST's options pits. According to the stock's Schaeffer's put/call open interest ratio (SOIR) of 0.47, short-term speculators have only been more call-skewed 10% of the time in the past year.

On the Street, however, analysts are split. While six brokerage firms rate the stock a "buy" or better, seven others maintain tepid "hold" recommendations. However, along with Stifel -- which hiked its price target to $165 from $130 -- MNST received bullish analyst attention from Jefferies, J.P. Morgan Securities, and BMO. Moreover, the shares have easily surpassed their average 12-month price target of $123.53, setting the stage for more price-target hikes.

On the technical front, Monster Beverage Corp (NASDAQ:MNST) has been spectacular. Today's gains bring the stock's 52-week lead to nearly 90%.


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