August 5, 2016 | 10:59 AM by Fahad Khalid |

Unlock: Monster Beverage (MNST) Calendar Spread +130%

It pays to do fundamental research. This note was sent to clients a day before MNST earnings. The calendar spread is +130% today. To learn more about our approach and how you can become a successful trader, sign up for 2 week trial and test drive live chat room with some of the best traders: SUBSCRIBE

Monster Beverage (MNST) – Thoughts going into earnings:

Positives (plenty to point out):
1) To launch major new beverage in Q3 (not in consensus)
2) Launched in Australia on May 1
3) Launched in New Zealand on May 9
4) Transitioned approx 84% of distribution rights to Coke
5) Nearly all of China gave approval in last 2 months, launching soon

Negative (just one):
1) Nielsen channel checks shows small deceleration in Q2

Quite frankly, I am not sure if that Nielsen data is actually even negative. First, Nielsen is looking at 2-year stack when in reality there was huge jump checks in June and July. That actually is positive and it is confirmed by YoY unit volume check in past two months. Secondly, while Red Bull is losing pricing power, Monster has been holding its pricing power since October last year, thanks to partnership with Coke. Lastly, the entire basis for partnership with Coke is to tap on international growth. That looks very robust to me and Australia and China are just coming along for the first time and MNST is tapping into 84% of Coke distribution network.

Like buying September / August (5) Weekly 165-strike call calendar spread for $1.60 or less as earnings play using lunch money.

MNST Chart


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