1,000% Gainer Set to Return Additional Double-Digit Profits

When a stock is up more than 30% in just the past three months, you can say it has "the juice." In the case of Southern California-based Monster Beverage (NASDAQ: MNST) "the juice" is generated by its uber-cool energy drinks.

The company's namesake beverage, Monster Energy Drink, is what propelled it into national and global prominence. But like any good beverage company, Monster offers all sorts of brands for all sorts of tastes, including Java Monster, Worx Energy, Peace Tea, Hansen's, Blue Sky and a host of others.

The success of Monster's existing brands has made it one of the biggest beverage industry success stories of the past decade, and that success has translated into huge success on Wall Street. MNST stock is up 1,000% in the past 10 years, easily vaulting the shares to rock star status among investors.

The tremendous growth in Monster's business, as well as the outstanding share price performance, hasn't been lost on the giants in the beverage space. In 2012, the biggest and baddest beverage company on the block, Coca-Cola (NYSE: KO), was in negotiations to purchase Monster. Speculation that a Coke/Monster deal would happen sent MNST soaring to an all-time high of $79 in June 2012. Well, that deal never materialized, and the shares have yet to recapture their former glory.

All that may be changing, however, as renewed speculation and rumors about a Coke/Monster deal has been brewing on Wall Street. The logic of a deal is easy to follow, which is one reason why so many industry watchers think it's destined to happen.

Monster has a huge footprint in the energy drink market, and despite its attempts, Coca-Cola hasn't hit the mark with either its Full Throttle or NOS brand. What Coca-Cola does have is distribution muscle, and to really get huge and expand its business in a major way, Monster needs to piggyback on that so it can move into every corner of the globe.

Indeed, distribution is Monster's Achilles' heel, as it currently uses contract agents to get its cans from source to store. The middleman would be eliminated with a Coke deal, and that would bring distribution costs way down, and also allow Monster to reach markets currently out of its range.

From a trading perspective, I usually don't like to bet on a takeover deal to get a big bounce in a stock. Fortunately, with MNST, a Coca-Cola deal is just one of the factors that could keep the shares going higher.

After the closing bell on Thursday, Feb. 27, we will get Monster's Q4 earnings report. The current consensus EPS estimate is $0.46 on revenue of $524.5 million. If Monster manages to best those metrics, I think we'll see a move into new high territory that could take the stock up to the mid-$80 range.

Ironically, the run higher in the shares over the past year has come despite the fact that Monster has actually missed estimates in each of the past four quarters. A strong showing next week will be a welcome change, and it could be just the catalyst Coca-Cola needs to put the deal together once and for all.

MNST Stock Chart

Recommended Trade Setup:

-- Buy MNST at the market price
-- Set stop-loss at $69, approximately 8% below current price
-- Set initial price target at $84 for a potential 12% gain in six weeks

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