2024-02-21 09:00:00 ET
Summary
- It appears that PM has temporarily emerged as a winner of the ongoing transition to smoke-free tobaccos, while also recording a somewhat stable cigarette shipping volume.
- With its smoke-free segment already being accretive to its top/ bottom lines, we can understand why PM has been awarded with the premium growth valuations, compared to MO and BTI.
- Its prospects are likely to be moderately lifted moving forward, assuming a successful IQOS 3 launch in the US in Q2'24 and IQOS ILUMA in 2025.
- There is no doubt that the US tobacco market is one that is highly profitable, with PM's growth expected to continue moving forward, aided by the secure supply chain.
- As a result of the (prospective) dual-pronged returns from capital appreciation and dividend income, we are maintaining our Buy rating for the PM stock.
We previously covered Philip Morris (PM) in November 2023, discussing the massive pessimism observed in its valuations and stock prices, likely attributed to Mr. Market's growing concerns about the secular trend of declining cigarette demand.
However, we believed that that the sell off had been overly done with the stock only pulled down by its peers' underwhelming performance, since the company continued to report growing volumes and stable top/ bottom lines, resulting in our sustained Buy rating....
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Philip Morris: Best Of Breed As 2024/2025 Brings New Tailwinds