Tuesday, UBS analyst Faham Baig increased the price target on Altria Group Inc (NYSE:MO) shares to $46.00 from the previous $42.00, while continuing to recommend a Sell rating on the stock. The stock currently trades at $60.02, near its 52-week high of $60.18, having delivered an impressive 50.17% return over the past year. According to InvestingPro analysis, Altria appears fairly valued at current levels. Baig explained the rationale behind the price target adjustment, citing concerns over Altria’s pricing strategy and market share losses.
Altria has been raising cigarette prices to counteract declining volumes, which has led to its products being priced at a premium of over 20% compared to the market. Despite these challenges, the company maintains impressive gross profit margins of 70.13% and trades at an attractive P/E ratio of 9.15. This pricing strategy has resulted in an approximate 1.5% year-over-year loss in volume share, with the company’s underlying cigarette volumes dropping by 11-12%. Baig pointed out that Altria’s potential increased presence in the discount segment with its Marlboro Black and Basic brands could dilute price/mix and potentially affect profits.
The UBS analyst also mentioned the potential impact of regulatory decisions on the competitive landscape. The Office of the U.S. Trade Representative has not opposed the International Trade Commission’s final determination that NJOY ACE infringes on JUUL patents, leading to a ban on the sale of NJOY ACE vaping products starting today. Although this could result in a one-time approximately $100 million benefit to Altria’s operating income, Baig believes this has likely already been factored into Altria’s fiscal year 2025 guidance.
Additionally, Baig noted that nicotine pouch volumes have stabilized sequentially over the past five months, according to NielsenIQ data. However, he remains concerned about Altria’s future, predicting that the combination of double-digit declines in cigarette volumes and limited progress in the smoke-free product category could lead to a decrease in net income for fiscal years 2026 and 2027. The analyst’s earnings per share estimates are 4.4% and 7.5% below the consensus, respectively, reinforcing the Sell rating on Altria shares. Despite these concerns, InvestingPro data shows the company maintains a strong dividend yield of 6.8% and has maintained dividend payments for 55 consecutive years. For deeper insights into Altria’s financial health and future prospects, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.
In other recent news, Altria Group Inc. reported its fourth-quarter 2024 earnings, meeting analyst expectations with earnings per share (EPS) of $1.29 and surpassing revenue forecasts with $5.11 billion. The company confirmed its full-year 2025 EPS guidance, projecting growth between 2% and 5%. Altria also announced the issuance of $1 billion in new debt securities, divided into two series maturing in 2028 and 2035. Meanwhile, Citi analysts maintained a Neutral rating with a $52 price target for Altria, citing challenges with the NJOY ACE vapor product due to a cease-and-desist order effective March 2025. Stifel analysts, however, upheld a Buy rating and a $60 price target, noting Altria’s modest outperformance in EPS growth driven by a lower tax rate and reduced Master Settlement Agreement costs. The company faces regulatory challenges in the vapor market, with ongoing litigation concerning NJOY and JUUL. Altria’s CEO highlighted the potential for tobacco harm reduction in the U.S. and the company’s commitment to expanding its portfolio of FDA-authorized smoke-free products.
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