Monster might have marketing power, but it’s nothing compared to the marketing power of The Coca-Cola Company (NYSE:KO). And while The Coca-Cola Company (NYSE:KO) is performing well in the “still beverage” category, it’s seeing consistent volume declines in “sparkling beverages,” mostly due to more health-conscious consumers. Therefore, Coca-Cola might choose to up its game in the energy-drink market in order to improve top-line growth. Coca-Cola already has a distribution relationship with Monster, and Coca-Cola wants to be a bigger player in the energy drink market. This has led many people to believe that Coca-Cola might one day purchase Monster. However, this deal would come with a hefty price tag, and Coca-Cola isn’t going to make a move like this unless its certain of Monster’s growth potential.
The Coca-Cola Company (NYSE:KO) currently has NOS, Full Throttle, Power Play, and Mother energy drinks, but it doesn’t market them aggressively. PepsiCo, Inc. (NYSE:PEP) has AMP, but like Coca-Cola, PepsiCo, Inc. (NYSE:PEP)’s attempt at capturing significant market share in the energy drink market hasn’t gone as planned. However, Pepsi is the most diversified company of the bunch, mostly thanks to its strong snack position. But it also owns Tropicana, Gatorade, Aquafina, Sobe, Sierra Mist, and more.
From a valuation standpoint, Monster Beverage Corp (NASDAQ:MNST) is trading at 35 times earnings, whereas Coca-Cola and PepsiCo, Inc. (NYSE:PEP) are trading at 20 times earnings and 19 times earnings, respectively. Monster has no long-term debt, which is a big positive, but it doesn’t offer any yield, whereas The Coca-Cola Company (NYSE:KO) and PepsiCo, Inc. (NYSE:PEP) yield 2.9% and 2.8%, respectively. Therefore, if these stocks aren’t moving, you will at least be rewarded for your patience.
Conclusion
If you’re willing to roll the dice, then Monster Beverage Corp (NASDAQ:MNST) might be a good investment option for you. The majority of the stock’s run over the past several years looks to be complete. But Monster is very good at marketing its brand in a cool and effective manner. Therefore, upside potential exists, especially considering the company’s international expansion plans. If you’re looking for steadiness and safety, consider Coca-Cola or PepsiCo, Inc. (NYSE:PEP).
The article Looking Into the Mind of a Monster originally appeared on Fool.com and is written by Dan Moskowitz.
Dan Moskowitz has no position in any stocks mentioned. The Motley Fool recommends Coca-Cola, Monster Beverage, and PepsiCo. The Motley Fool owns shares of Monster Beverage and PepsiCo.
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