Monster Beverage's Valuation 'Looks Full,' Jefferies Notes

In a report published Thursday evening, Jefferies analyst Kevin Grundy commented that Monster Beverage Corp's (NASDAQ: MNST) valuation "looks full" following its fourth quarter "high quality" beat.

Grundy noted that Monster Beverage is off to a "strong start" in the first quarter as lower gas prices are boosting energy drink sales, based on management's commentary during its conference call. However, the analyst added that management "did not point to anything else particularly notable."

Grundy also stated that there has been no noticeable disruption ahead of its distributor transition and that the company's international profitability continues to improve. In addition, the company expects revenue growth to accelerate once its deal with Coca-Cola closes, although the analyst wrote that "this has yet to be quantified."

"While market expectations are likely higher, Street estimates appear to under-estimate the benefit from the inflection of Monster Beverage's international margins (operating margin percentage outside of North America likely to move into the low-to-mid 20 percent rage) and favorable mix from the Coca-Cola deal (c. +260 basis points from mix alone for Monster Beverage)," Grundy wrote. "Yet, on our above consensus estimates, Monster Beverage's valuation looks full 17.7x CY16e EV/EBITDA."

Shares remain Hold rated with a price target raised to $132 from a previous $120.