Monster Beverage Corp (MNST), Molson Coors Brewing Company (TAP): Who’s Profiting from SXSW?

SXSW brings over 300,000 people and hundreds of millions of dollars to Austin, Texas each March, and with so many trends and setters in one place, even established brands hit the streets and panels to pitch products. Every one of SXSW’s 5,000-plus events is sponsored by at least one company, many if not most of which clearly did their market research wrong. Most investors simply ignore marketing costs, which are bundled into the operating expenses line on a company’s income statement. However, a company’s marketing presence at top industry events like SXSW can give investors a telling look at how employees handle cash and image.

Monster Beverage Corp (MNST)

Monster Beverage Corp (NASDAQ:MNST) excelled as a SXSW sponsor. The company was one of the festival’s main sponsors and used its marketing dollars well: it had a prominent and highly-coveted VIP viewing deck at the festival’s biggest venue and its vehicles were some of the only ones on the festival’s main thoroughfare, giving Monster extra advertising and an edge on other street teams. Of course, Monster is hitting its core demographic in a good environment: people want cold energy drinks at a multiday music and technology festival in Texas. As an investment, Monster Beverage Corp (NASDAQ:MNST) doesn’t have much cash flow, but what it does have it manages well: with a price-to-free-cash-flow ratio of 33, it has a profit margin of 16.5% and a return on assets of 32.6%, both above industry averages. Monster’s share price has tumbled nearly 50% in the last six months, but with a P/E of 25 the stock is still a tad pricey. However, with 20% revenue growth in the last year and 17% in the last five, investors may have a good entry point for Monster Beverage Corp (NASDAQ:MNST).

Miller Lite starred as SXSW’s official beer for the 13th year, giving parent company Molson Coors Brewing Company (NYSE:TAP) plenty of exposure. Like Monster, Molson Coors hit a key demographic in a great environment: everyone wants a cold light beer while watching music in the Texas sun. While tens of thousands of attendees held Miller Lite cans and pints over the week, many of them jumped for higher quality light beer when available, like craft IPAs and hefeweizens. Molson Coors Brewing Company (NYSE:TAP) could have taken advantage of the trend by pushing its Blue Moon brand, but it didn’t. As an investment, Molson Coors looks an awful lot like Miller Lite: cheap, but hardly reassuring. The company’s P/E is a tad high at 19, but it sells at 1.10 price-to-book and 1.57 price-to-sales. However, the company has negative free cash flow and the debt that comes with it: debt-to-equity stands at .59. Likewise, Molson Coors Brewing Company (NYSE:TAP) has slim margins, with net margins at 7%, and a return on assets of only 2.7%. For patient true believers, though, shares carry a 2.6% dividend yield.

Turning to the technology side of SXSW, Yahoo! Inc. (NASDAQ:YHOO) was a main SXSW sponsor. SXSW attendees reported that the Yahoo! headquarters at Brazos Hall had an excellent set-up but was often poorly attended, as it was two blocks off the main street and not well-advertised. As Tim Beyers and Allison Southwick suggest, Yahoo!’s SXSW presence seemed upstaged by competitors, particularly Google, that didn’t even enjoy preferential placement as sponsors. As an investment, Yahoo! is cheap but far from solid. Yahoo!’s P/E of 6 and price-to-book of 1.67 makes it extremely cheap, particularly for a technology stock, and it has cash, with a price-to-free-cash-flow ratio of 4.5. However, the company is cheap because it is losing ground: it has had declining revenue growth for the last five years – though increasing earnings per share growth – and cannot seem to grab market share from Google.