Monster Beverages (NASDAQ:MNST) hasn’t had a great year, with shares flat over the past 12 months. On the plus side though, MNST stock is up about 20% for 2019.
Because Monster stock and so many others limped into this year, many boast incredible year-to-date returns. Heck, even the major moving averages fall into this category. While the 2019 returns look fabulous, investors need to remember that the one-year (and five-quarter and 1.5-year returns are not so upbeat).
In the case of MNST stock though, shares are starting to crack through some key technical levels. While a broad-based market selloff could weigh on the stock price and/or the breakout may not take hold, Monster Beverage could be gearing up for a strong start to 2020.
Let’s look at the charts, then the fundamentals.
Trading MNST Stock
Monster stock chopped in a range so tight it’s hard to believe. The stock was pinned between $56 and $57 for a month, before finally ripping higher in early November on earnings.
While the rally was discouraging in the sense that it failed to hold a bulk of its gains, it was also encouraging as it broke MNST stock out of that tight trading range. In the ensuing days, MNST even tested back down into prior resistance. Once it held as support — a key bullish development — then it began to rally.
Despite the bulls’ latest efforts, the $60 to $61 area continues to hold as resistance. That’s been a notable level over the past 12 months, while the 200-day moving average currently sits at $59.50.
Uptrend support and the 20-day moving average have been guiding shares higher too. While this isn’t the cleanest ascending triangle pattern out there, a series of lower lows pushing a stock into a static level of resistance is generally a good sign.
That setup is negated should support give way. In that instance — if the 20-day moving average and uptrend support fail — look for a decline down to the 50-day moving average. That comes into play at $57.30, just above prior resistance last month. If that doesn’t buoy shares and MNST stock falls below $56, $53.50 to $54 could be in the cards.
On the upside, I’d love to see MNST stock rally over $60 and take out the recent high of $60.28. Over that mark puts the November high of $61.49 on the table. Those are the first steps in getting Monster stock up to range resistance, which is up at $66.
Valuing Monster Stock
Are the charts a layup-guarantee for a year-end rally or a 2020 breakout? No. But they are setting up in a way that is at least attractive — rather than in a way that is negative for the overall case to owning MNST stock.
In that regard, what do the fundamentals say for MNST stock?
On the plus side, Monster stock is fairly consistent. On the downside, many may consider the name expensive from a valuation perspective.
Trading at roughly 28.5 times earnings isn’t exactly cheap. However, some may argue that with Coca-Cola (NYSE:KO) and PepsiCo (NASDAQ:PEP) trading at 25- and 24.5-times earnings, respectively, that MNST stock isn’t that overvalued given its growth. Detractors could make a reasonable argument that MNST is not the same quality as KO or PEP, though.
In any regard, the growth here is solid and consistent. Analysts expect MNST to grow revenue 9.9% this year and another 9% in 2020. On the earnings front, estimates call for 13.3% grow this year to $2.04 per share and for further growth of 10.3% in 2020.
Investors do have to like the fact that MNST stock doesn’t carry any long-term debt. Further, its total cash balance of $1.3 billion is more than enough to cover all of its current liabilities, which stand at $714 million. Current assets are more than triple its liability counterpart, while total assets stand at roughly five times Monster’s total liabilities.
In other words, this is a very healthy balance sheet and with consistent growth, bulls can make the argument that the stock’s valuation shouldn’t be an impediment to a potential rise in the stock price.
So, what now? Let’s see if we can get a definitive move over $60.
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell did not hold a position in any of the aforementioned securities.