The Monster Created By Wall Street
Courtesy of Citron Research
Citron believes now is the time for both long and shorts to consider the real facts surrounding the business, and consider the price of Monster Beverage (NASDAQ:MNST) within the perspective of current market conditions.
Amped-Up Valuation: Over the past 5 years MNST’s market valuation is up 500%, while its revenues are up 90%.
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Excerpt:
The past 6 months on Wall Street could be described as "interesting times". Hedge funds have underperformed the market — some "smart guys" have delivered near-catastrophic returns. Investors of all stripes are now clamoring to rebalance their portfolios. Everyone in the money management game is now facing up to the stark reality that has been altogether forgotten over the last seven years of "straight-up" euphoria:
Valuations Matter!!!
Yes, men with ponytails and screaming bald men on soapboxes have for years browbeat retail investors to buy stocks based on the principle that “they are high, so they have to be going higher”, ignoring underlying valuations. When that party ends, it ends fast, and as you've noticed, they don't ring a bell.
Mr. Market has done a fine job in rebalancing a lot of the froth in the market. But Citron has identified one stock whose valuation — yes, valuation — is completely removed from reality considering the business risks and limited growth opportunities.
We reintroduce the investing world to an old name that is worth a second look – Monster Beverage (NASDAQ:MNST).
The bear case thesis on Monster has been around for years. It used to focus on the headwinds of the energy drink business and the health risks of Citron Confronts the Monster Wall Street Created January 29, 2016 the product. All the while the price of MNST has continued to defy gravity–as if the stock drank four cans of its own product.
Shorts are sometimes right and sometimes wrong, but they are always early.
Picture via Pixabay.
