Analyst Upgrades Altria to 'Buy' Amid Tobacco Challenges

Altria has recently received an upgrade from Bank of America's analyst, now rated as a 'buy' with an increased target price. Despite ongoing challenges like declining cigarette sales, investor sentiment may improve if the anticipated economic policies come to fruition.

Date: 12-12-2024

AI Rating: 6

The report highlights a significant upgrade in Altria's stock by Bank of America's analyst, Lisa Lewandowski, who revised her rating from neutral to a buy. This decision is notable, particularly because the target price has been increased from $55 to $65 per share, indicating a nearly 19% potential upside from the stock's closing price on Dec. 11.

One of the primary reasons behind this optimistic shift in rating includes expectations of favorable policies from a new Republican presidential administration. Analysts believe that potential tariffs on foreign products and a corporate tax rate reduction could enhance Altria's profitability. These anticipated changes could lead to improved margins and have a positive impact on stock performance.

Moreover, the analyst pointed out that better economic conditions for lower-income consumers may stimulate the convenience sector, which tends to sell a high volume of tobacco products. This could further fortify Altria's revenue growth prospects if consumers decide to maintain their tobacco consumption amidst improving economic conditions.

However, the report does mention a decline in cigarette smoking as a major headwind facing Altria. Despite the introduction of next-generation products like vaping, these alternatives have yet to gain the same traction that traditional cigarettes once enjoyed. This ongoing challenge may weigh on Altria's net income and profit margins since it relies heavily on combustion products for revenue.

Overall, while there are several positive indicators from the analyst's revision, Altria faces significant challenges in cigarette sales decline, which could affect long-term growth and investor confidence.

Stocks: MO