Irina Iriser Photography
Tobacco stocks are finally rising again after 2018, and analysts still have good news on the horizon, especially for
Philip Morris International
The story back. Both
(MO) and Philip Morris posted double – digit gains in 2019, catching up after heavy losses last year. Equities have benefited from this year's robust earnings, offer healthy yields and benefit from analysts' optimism, particularly with respect to Altria's investment in cannabis. Yet, the threat of electronic cigarettes has not disappeared. Vaping takes market share from traditional products (even as part of an investigation into a possible link to foreclosures and reports that they have not proven to be good aids in quitting smoking). In addition, with so many teenagers and young people taking the habit of getting in the habit, the Food & Drug Administration is seeking to crack down on the cigarette aroma at all levels. Altria's investment in Juul Labs always been a boon for the stock.
What's up. Earlier this week, the TMA nonprofit tobacco consortium hosted a conference at which the director of the FDA's Center for Tobacco Products, Mitch Zeller, was the keynote speaker. It was his first major public appearance since the commissioner of the agency. Scott Gottliebannounced that he was retiring, and Zeller 's comments gave rise to hope that the government could adopt a less strict stance towards the tobacco actors.
Vivien Azer from Cowen & Co. attended the conference and wrote that "the most significant announcement … was the director of the FDA's Office of Science Matt Holman comment that the agency plans to take action on the [Philip Morris’s vaping device] Pre-market tobacco application (PMTA) iQOS this year. Recall that, while other e-cigarette products have proliferated in the United States, Philip Morris has been able to sell his device only overseas, his request from the FDA dragging for years without a decision. Holman said other applications would also be active this year, but gave no indication of their success or potential failure. Nevertheless, after such a long wait, a "resolution is a welcome development," writes Azer, even though Philip Morris's licensing benefits will be modest.
Look to the front. Azer is neutral on Philip Morris, but Christopher Growe from Stifel repeated a purchase price and a price target of $ 97 on the stock. He thinks that 2019 will finally be the year that iQOS will be approved by the United States. He writes that, even though there are still obstacles for the sector, such as lowering the volume of cigarettes, prices remain robust and that there are other compensating factors. He does not think the FDA will ban menthol this year, as farm volumes look set to improve and stock valuations look cheap. It also has a $ 59 purchase price and target price on Altria because it appreciates its earnings growth outlook and its pricing power.
Altria rose 0.6% to $ 56.33 on Friday, while Philip Morris rose 0.2% to $ 85.68.
Write to Teresa Rivas at [email protected]