Cabot Profit Booster Issue: April 8, 2025

A quick note: we have several stocks that are near our stops, or broke below them last week as the market quickly fell 10% following the tariff announcements. For now, I am going to give these trades a bit more time, though if conditions worsen again, we will be exiting these trades very quickly.

It was a historic week for the market, and not for any positive reasons as the S&P 500 fell 9.1%, the Dow lost 7.9% and the Nasdaq declined by 10%. Perhaps the weekend gave traders a bit of time to better digest the tariff news and the market will stabilize this week after an up-and-down Monday (futures are up big on Tuesday, but that can change quickly in these tariff times). It’s also possible that the uncertainty is just too much for traders to digest.

The Stock – Monster Beverage (MNST)

While they haven’t yet surpassed traditional caffeinated beverages like coffee and soda in popularity, energy drinks are a fast-growing part of the overall drink market. By some estimates, energy and sports drinks combined account for over half of all functional beverage sales today, and their market share is growing by the year.

Also growing quickly is Monster Beverage’s share in the global energy drink industry: It’s currently ranked number two (with a 33% share) behind Red Bull (43%), and it’s rapidly catching up to its big-brother competitor. Monster’s portfolio does include more than just energy drinks, with natural soft drinks, fruit drinks and no-sugar drink offerings also part of its product lineup—but the Energy segment makes up nearly all of sales, with revenue from that segment increasing 5% year-on-year to $1.7 billion in Q4, with EPS of 38 cents flat from a year ago and in line with expectations. Last year’s total revenue of $7.5 billion increased 5% from 2023, led by sales of top energy drinks like Monster Energy (its most recognizable brand) and the highly caffeinated Reign (especially popular among Millennials).

The latter cohort is a big reason for Wall Street’s sanguine expectations for Monster going forward, as studies suggest Millennials are more likely to buy energy drinks than tea, with a consumption rate of over 50% across that demographic, while a whopping 64% of Gen Z consumers regularly consume them, too. Analysts see this as a key factor even if the U.S. enters a recession since energy drinks are considered an affordable luxury, with younger consumers “less likely to drastically cut spending on things they see as essential for their lifestyle,” in the words of an industry report. And Monster is distributed mainly through convenience stores, gas stations and supermarkets, where business tends to remain steady even in downturns.

With or without a recession, Wall Street expects a pickup in growth for Monster, with steady low-teens earnings growth this year and double-digit growth over the next several years, due not only to the above factors but also thanks to international expansion—the top brass sees good things from markets like Argentina, Brazil, Colombia, Mexico and others, prompting two major banks to recently hike their outlooks.

Technical Analysis

MNST double-topped near 60 in mid-2023 and early 2024, sunk as low as 43 last August and, after a decent rally into November, retested that panic low in February. But now, as the market has caved in, this slow, steady grower has been advancing, with shares marching persistently back to resistance near 60 before getting whacked Friday. – Stop 51

The Covered Call Trade

Buy Monster Beverage (MNST) Stock at 57.5, Sell to Open May 57.5 Strike Calls (exp. 5/16) for $3, or a Net Price of 54.5 or less

Static Return: $300 per covered call (5.5%)

Breakeven: 54.5

Covered Call Return (if assigned): $300 per covered call (5.5%)

Please note, the stock and options prices will be moving throughout the day, so these prices are simply an approximation of prices that you should be able to achieve.

However, the important component of this equation is that the stock price paid, minus the premium received via the call sale, equals the approximate Net Price, or 54.5 or less. (In this case 57.5 minus 3 = 54.5. Or another example is you could pay 58 for the stock and sell the call for 3.50, which also equals 54.5.)

For every 100 shares of stock you buy, you can sell 1 call. For every 200 shares of stock you buy, you can sell 2 calls. And so on …

Open Positions

The next Cabot Profit Booster issue will be published on April 15, 2025.

Copyright © 2025. All rights reserved. Copying or electronic transmission of this information without permission is a violation of copyright law. For the protection of our subscribers, copyright violations will result in immediate termination of all subscriptions without refund. Disclosures: Cabot Wealth Network exists to serve you, our readers. We derive 100% of our revenue, or close to it, from selling subscriptions to our publications. Neither Cabot Wealth Network nor our employees are compensated in any way by the companies whose stocks we recommend or providers of associated financial services. Employees of Cabot Wealth Network may own some of the stocks recommended by our advisory services. Disclaimer: Sources of information are believed to be reliable but they are not guaranteed to be complete or error-free. Recommendations, opinions or suggestions are given with the understanding that subscribers acting on information assume all risks involved. Buy/Sell Recommendations: are made in regular issues, updates, or alerts by email and on the private subscriber website. Subscribers agree to adhere to all terms and conditions which can be found on CabotWealth.com and are subject to change. Violations will result in termination of all subscriptions without refund in addition to any civil and criminal penalties available under the law.