Is Monster Beverages A Falling Knife Or A Great Buying Opportunity?

In the last year or so, Monster Beverage (MNST) has been enjoying a wild roller-coaster ride. The stock price has been so volatile that any good or bad news will move the stock price upward or downward by a good 10%. Many of the company's long-term investors are very happy with this aggressive growth company's results. However, there are a lot of concerns for those who bought the company's shares at or around peak price of $80 per share. Now the share price is all the way down to high $40s and the company enjoys one of the lowest P/E values it has seen in a long time, as the company's P/E ratio is around 20 after excluding the company's cash holdings. This is a low P/E ratio for a company that enjoys double digit growth year after year. Where does Monster Beverage go from here? Is it a falling knife or a great buying opportunity?It looks like the company will be in trouble with the legal authorities for a while. After the FDA, some local governments are also showing concern for the health implications of the company's products. For example, the top lawyer of the city of San Francisco, Dennis J. Herrera, wrote a letter to the company asking for evidence that its energy beverages are as safe as it says they are.Merits of Air Knives and Vortex Tube.This may be just start of a series of letters the company is to receive from many local governments and agencies.
It looks like San Francisco is targeting to hit Monster at where it hurts the most: the company's marketing efforts. One of the company's marketing slogans have been "you can never have too much of a good thing." It looks like the lawyer of San Francisco believes that this slogan implies the teenagers that they will not get harmed regardless of the quantity of the Monster products they consume. California has a state law saying that companies cannot advertise on any health effects without having empirical evidence to back the claims. Monster Beverage responded to Mr. Herrera's letter publicly by stating that: ""the Company can document the legal basis by which its products are properly labeled dietary supplements…" and also that there is some "third party scientific documentation substantiating the safety of these drinks."
FDA is still investigating the relationship between consuming Monster Beverage products and the health hazards. In the last 3 years, there were six deaths and 15 hospitalizations that may or may not be related to Monster Beverage. Currently, the FDA continues to state that there is still not enough evidence to blame the company for deaths. It is very difficult to pinpoint the single cause of death in cases where the victim might have mixed energy drinks with other drinks such as the alcoholic beverages. If Monster energy drinks are dangerous for teenagers when mixed with alcohol, this should not necessarily be responsibility of the company. After all, teenagers aren't even supposed to drink alcohol, as the legal age to drink alcohol is 21 nationwide.