Monster Beverage Corp. (NASDAQ: MNST) fell 3% on Wednesday after Rothschild & Co Redburn downgraded the stock from Buy to Neutral.
The firm also reduced its price target from $63 to $60.
The decision follows the U.S. government’s announcement to double tariffs on imported aluminum from 25% to 50%– a key packaging material for the company’s energy drinks.
While Monster has strategies in place to reduce the immediate impact on margins, Redburn’s research note indicates that increased aluminum costs are likely to pressure profitability in 2026.
This coincides with the expected expiration of US price increases that currently help offset input costs.
As a result, analysts have raised concerns about Monster’s ability to achieve its projected gross margin expansion in that year.
The downgrade comes despite relatively stable current trading levels.
Based on one-year forecasts from 23 analysts, the average price target for MNST stands at $62.28, implying just a 1.12% upside from the stock’s latest price of $61.59.
The highest estimate is $72.00, while the lowest is $49.00.
Margin improvement while sales dip
In its Q1 2025 earnings report released on May, Monster reported net sales of $1.85 billion, a 2.3% decline from $1.9 billion in Q1 2024.
However, gross profit margin rose to 56.5%, up from 54.1% a year earlier, indicating improved cost efficiency.
Operating income increased by 5.1% to $569.7 million, while net income was nearly flat at $443 million, compared to $442 million in the prior-year quarter.
Diluted earnings per share (EPS) rose to $0.45, a 7.4% increase year-over-year.
The company also managed to reduce operating expenses from $485.1 million in Q1 2024 to $478.2 million.
Despite these operational gains, net sales were negatively affected by adverse foreign currency exchange impacts totaling $57.3 million, as well as bottler and distributor ordering patterns.
Sales of the flagship Monster brand grew 8.7% during the 13-week period ending April 26, 2025, while the Rain brand saw a 9.9% decline.
Monster’s market share in the US convenience and gas channel dipped slightly from 29.2% to 29%.
International strength
International markets were a bright spot in the quarter.
On a currency-neutral basis, Monster’s net sales outside the US rose by 6.2% to $790.5 million.
Notably, sales increased 40.1% in China and 21.6% in Oceania.
The company continues to view China and India as strategic long-term growth markets, with expansion plans for its Predator brand in these regions.
In terms of innovation, Monster introduced new flavors and products across multiple regions, including North America, Latin America, Canada, and EMEA.
The global energy drink category remains in growth mode, and Monster gained market share in countries such as Belgium, Germany, Denmark, the Czech Republic, and Great Britain.
However, not all segments performed equally. The Alcohol Brands segment posted net sales of $34.7 million, representing a steep 38.1% decline from the previous year.
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