Monster Beverage (MNST) stock has recently pulled back from all-time highs amid the imposition of significant tariffs on imported aluminum, a key material used in the company’s signature canned energy drinks. Aluminum accounts for a substantial portion of Monster’s cost of goods sold (COGS). To date, the company’s mitigation efforts, including strategic pricing and hedging, have proven effective, as reflected in the more substantial gross margins reported in its Q1 2025 earnings report published in May.
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However, these hedging contracts, which secured aluminum prices through 2025, are set to expire in 2026, potentially exposing the company to increased cost pressures. Coupled with intensifying competition in a consolidating energy drink market, these headwinds lead me to maintain a cautiously Neutral stance on MNST.
Aluminum Sources Become a Core Cost Concern
President Trump’s sweeping tariff hikes are sparing no commodity, with aluminum among the hardest hit. Just last month, the tariff on imported aluminum doubled from 25% to 50%, driving up production costs for a wide range of canned goods. This comes as a major blow to the food and beverage industry, which already operates on tight margins. As a result, key industry voices have raised concerns that these added costs will ultimately be passed on to consumers, given that many companies are unable to absorb them.
For Monster, aluminum accounts for approximately 27% of its total cost of goods sold, making it particularly vulnerable to price fluctuations. To counter this, the company has taken a proactive stance. It utilizes derivative instruments to hedge against aluminum price volatility, although these contracts have a limited lifespan and do not offer permanent protection.
Additionally, Monster implemented a 5% price increase across its core U.S. brands and packaging in November to help offset rising input costs. The company is also working to reduce its dependence on imported aluminum by shifting toward more localized production.
MNST Registers Monster Margins Despite Headwinds
Despite tariff concerns, Monster actually reported a significant improvement in its gross profit margin in the first quarter of 2025, rising from 54.1% in the first quarter of 2024 to 56.5%. Operating income also increased by 5.1% to $569.7 million. Moving forward, analysts expect Monster’s gross margins to contract by ~0.7%.
New Product Challenges & Market Dynamics
Monster is contending with several additional challenges. Its newer Alcohol Brands segment saw a steep 38.1% year-over-year drop in net sales, driven by a mix of factors including irregular distributor ordering patterns and unfavorable weather conditions. Coupled with softer overall demand for energy drinks in Q1, this contributed to total revenue of $1.85 billion—a rare 2.3% decline year-over-year and a 6% miss relative to expectations when the company last reported official performance figures in May.
Despite these setbacks, Monster remains a dominant force in the energy drink space, holding roughly one-third of the market, just behind Red Bull. The competitive landscape has shifted somewhat following Celsius’s (CELH) $1.8 billion acquisition of Alani Nu earlier this year, a move that expanded its portfolio of zero-sugar, “functional” beverages.
As innovation remains essential in the beverage industry, Monster has continued to roll out new products. The U.S. launches of Monster Energy Ultra Blue Hawaiian and Vice Guava earlier this year have performed well. In the alcohol segment, Monster introduced its first flavored malt beverage, “The Beast Unleashed.” Meanwhile, strong international performance—particularly in China, where sales grew 40.1% year-over-year—has helped offset domestic softness.
Is MNST Stock a Buy, Sell, or Hold?
On Wall Street, MNST carries a Moderate Buy consensus rating based on ten Buy, seven Hold, and one Sell ratings in the past three months. MNST’s average stock price target of $65 implies an upside potential of ~10% over the next twelve months.
Analyst Dara Mohsenian from Morgan Stanley has a Buy rating on MNST with a price target of $70. The analyst pointed to both short-term and long-term growth opportunities, including the global expansion of the energy drink market. In the near term, the bank noted that Monster is well-positioned to benefit from a recovery in the U.S. energy drink segment, supported by encouraging survey data and household panel trends. This rebound is expected to enhance Monster’s market share and fuel revenue growth, momentum that the analyst believes is not yet fully priced into the stock.
Tariff Shields Erode as Valuation Pressures Loom
Monster has built a strong defense against the aluminum tariffs, with hedging strategies serving as its primary line of defense. However, this protection is temporary. Once these hedges expire, likely starting in 2026, the company will face renewed pressure on profitability.
That said, longer-term mitigation efforts—such as price adjustments and diversifying its supply chain—should offer more sustainable benefits. Additionally, the broader question remains: could these tariffs prompt the beverage industry to adopt more eco-friendly practices, such as increased use of recycled aluminum? Probably not.
Nonetheless, the outlook presents some concerns. Margin compression beyond 2025, combined with ongoing softness in U.S. revenue growth, raises red flags—particularly when considered in light of Monster’s rich valuation. The stock currently trades at a Price-to-Earnings (P/E) ratio of 39.4, which is more than double the median P/E ratio of the Consumer Staples sector, at 17.25. While some premium is justified—Monster boasts a gross profit margin 51% higher than the sector average—its year-over-year revenue growth of 1.47% still lags the sector median of 1.62%.
According to TipRanks’ peers comparison tool, MNST remains a laggard in its sector with several firms expected to outperform while MNST remains stuck in neutral.
Looking ahead, investors should closely watch how effectively Monster executes its mitigation strategies. Continued product innovation will be essential to sustaining market share. However, if revenue growth remains sluggish, there’s a real possibility the stock’s valuation could contract further as the company enters a more mature growth phase. As such, I remain Neutral on Monster’s stock.