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Monster shares fall after analyst downgrade

Wednesday, 10 Oct 2012 | 2:11 PM ET

NEW YORK -- Shares of Monster Beverage Corp. fell Wednesday after a Stifel Nicolaus analyst lowered his rating on the energy drink maker, citing slowing sales growth and regulatory risks.

THE SPARK: After years of growth, Monster faces tough year-over comparisons, analyst Mark Astrachan noted. He also noted that regulatory risks remain for the company, given the New York state attorney general's investigation into the marketing practices of Monster Beverage and other energy drink makers.

Astrachan lowered his rating on the company to "hold" from "buy."

Still, he expects the company will achieve sales growth in the mid-teens through at least 2015, as the energy drink market continues to grow in the U.S. and abroad.

THE BIG PICTURE: Energy drinks remain a tiny part of the carbonated soft drinks market, representing just 3 percent of sales volume, according to the industry tracker Beverage Digest. But while soda consumption has flagged in recent years, energy drinks have taken flight.

Last year, sales volume for energy drinks rose by nearly 17 percent, with the top three players _ Monster, Red Bull and Rockstar _ all logging double-digit gains, according to Beverage Digest.

But the industry is also facing growing scrutiny. This summer, New York state attorney general issued subpoenas to Monster Beverage; the maker of 5-Hour Energy, Living Essentials LLC; and PepsiCo Inc., which makes AMP energy drinks.

Details haven't been disclosed, but the probe is examining how the drinks are made and marketed.

SHARE ACTION: Monster Beverage shares fell $2.83, or 5 percent, to $53.91 in afternoon trading. Its shares have fallen 36 percent since hitting a 52-week high of $83.96 in late April.

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