Monster Beverage Corporation (MNST) shares rose 5% during Wednesday's session after the company reported better-than-expected second quarter financial results. Monster Beverage stock received a big price target increase from Bank of America analysts following the move.
Revenue fell 0.9% to $1.09 billion during the second quarter, beating consensus estimates by $90 million, while GAAP earnings per share hit 59 cents, beating consensus estimates by 10 cents. Gross margins and operating margins rose 40 and 290 basis points, respectively, also coming in sharply higher than consensus expectations.
Bank of America analysts reiterated their Buy rating on Monster Beverage and raised their price target from $80 to $95 per share, representing a 20% premium to Tuesday's closing price, contributing to Wednesday's extended breakout higher. While BofA maintains a higher price target than many other analysts, the Street has been mostly bullish on the beverage maker.
There's also evidence of upcoming catalysts ahead. Stifel analyst Mark Astrachan said earlier this month that Monster Beverage is considering introducing an alcoholic drink – most likely a seltzer. If Monster can achieve just a 3.3% market share with its new product, as it has with the Reign fitness brand, the analyst believes the company could add about $76 million in annual sales to its business.
From a technical standpoint, Monster Beverage stock broke out to fresh highs during Wednesday's session. The relative strength index (RSI) rose further into overbought territory with a reading of 79.55, but the moving average convergence divergence (MACD) continued its bullish uptrend. These indicators suggest that the stock could see some consolidation before a move higher.
Traders should watch for consolidation above prior highs of $78.79 over the coming sessions. If the stock extends its breakout further, traders could see a move to upper trendline resistance at $86.00. If the stock breaks down, traders could see a move toward lower trendline support at $73.50 or the 50-day moving average at $72.16, although that scenario seems less likely to occur.
The author holds no position in the stock(s) mentioned except through passively managed index funds.