Analysts Downgrade Big Tobacco Stocks

Equity analysts are lowering their fair value estimates for three global large-cap tobacco manufacturers

Philip Gorham 3 August, 2018 | 9:52AM

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Equity analysts are lowering their fair value estimates for three global large-cap tobacco manufacturers, after taking a less optimistic view of medium-term margins. Nevertheless, we still believe upside exists to the stocks, particularly Imperial Brands (IMB) and Philip Morris International (PM), and we think the group is heavily out of favour after heated tobacco sales suddenly plateaued in Japan in the first quarter of this year.

The catalyst, however, may not come until early next year when PMI commercializes its disposable heated-tobacco product. The high cost of the devices may be keeping some consumers on the sidelines, and we expect the late adopters to be enticed by some of the pipeline products that the tobacco manufacturers will bring to market in the next two to three years.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
British American Tobacco PLC2,710.50 GBX-2.50
Imperial Brands PLC1,500.81 GBX0.22
Philip Morris International Inc76.19 USD-0.70

About Author

Philip Gorham  

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