Analyst Pamela Kaufman lowered her price target to $50 from $54.
Illustration by Joel Arbaje
stock fell Wednesday after Morgan Stanley warned of increasing headwinds to the cigarette industry.
Analyst Pamela Kaufman downgraded her rating of the cigarette company to Underweight from Equal Weight and lowered her price target to $50 from $54. She cited consumer constraints due to increasing gas prices and competition from other major tobacco manufacturers as reasons for the bearish view.
(ticker: MO) slid 6.7% Wednesday to $50.37, while the
slipped 0.5%. The stock has climbed 6.3% this year.
Smokers tend to skew toward low-income consumers, who are most affected by rising gas and food prices, Kaufman said in a research note.
“Historically, there has been a strong inverse relationship between gas prices and cigarette volumes,” Kaufman wrote. “We anticipate lower cigarette consumption as consumers look for savings, with products sold at gas stations particularly vulnerable.”
Philip Morris International
(PM), another tobacco products maker and a direct competitor of Altria, agreed to buy Swedish Match back in May. Kaufman said “the market is underappreciating the risk” the deal poses to Altria, as it will allow Philip Morris to “to enter the U.S. market directly with IQOS in 2024.”
IQOS is a heated tobacco system which is advertised as an alternative to traditional smoking.
The Morgan Stanley downgrade is currently the only negative rating of Altria’s stock. The cigarette company has one Sell rating, six Hold ratings, and four Buy ratings, according to analysts polled on FactSet.
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