2024-02-08 16:00:00 ET
Summary
- We are maintaining our Buy rating on MO, with the stock consistently supported at the $40s and NJOY's shelf reset likely to bear excellent results by H2'24.
- Its cigarette volume decline may be painfully accelerated compared to its peers, warranting the management's aggressive smoke-free approaches thus far.
- MO may have bottomed here, with an excellent potential for capital appreciation and dividends, assuming a future rerating nearer to the sector median and 3Y pre-pandemic means.
- Assuming similarly depressed stock prices, we may also see the tobacco company retiring a good amount of shares ahead, with the $1B already triggering a reduced annual dividend obligation of up to $88.3M.
- However, MO investors may need to temper their intermediate term expectations, with marketing expenses likely to balloon and profit margins impacted during the transition.
We previously covered Altria (MO) in October 2023, discussing its oversold status then, with the market over reacting to the minimally lowered FY2023 guidance and consistently declining sales volume for conventional tobacco products.
However, we had placed our confidence on its latest acquisition, NJOY, with it demonstrating the management's determination to diversify its tobacco offerings while tapping on its existing manufacturing and distribution expertise....
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For further details see:
Tobacco Transition - Altria's Weakest Link May Be Its Greatest Asset Ahead