Wells Fargo predicts a positive long-term opportunity for the energy drink companies, even as the short term may have its bumps.
A previously-announced transaction between Coca-Cola and Monster closed Friday, June 12, 2015.
With the transaction complete, Monster now gains access to Coca-Cola’s global distribution network and energy brands, plus $2.15 billion in cash in exchange for a 16.7% equity stake in Monster and its non-energy brands.
“We continue to think this transaction is a huge win for both companies as it capitalizes on the respective strengths of each,” noted Bonnie Herzog, managing director of beverage, tobacco and convenience research for Wells Fargo Securities LLC. “As such, we remain very encouraged by MNST’s long-term growth prospects, particularly in international markets. However, we remain cautious on the stock near term since we expect its Q2 results will be negatively impacted by distribution issues as it transitions to the Coca-Cola system.”
Wells Fargo further noted that Red Bull has been gaining dollar share from Monster driven by its successful innovation and its higher prices. And while Monster’s Q2 may be negatively impacted, “it appears issues are being addressed and broadly improving and Monster’s results for the second half of the year are anticipated to improve.