Jefferies lowered its have a claim to to hold from buy on shares of both Philip Morris and Altria, give the word delivering the tobacco companies are falling behind in heated tobacco markets and sinking behind in vapor product markets.
“See significant share loss” for Philip Morris in Japan’s quickened tobacco products market during the second half of this year and envision the U.S. heated market to now have a “smaller contribution,” Jefferies analyst Owen Bennett communicated in a note Friday.
Altria is “at a disadvantage in vapour due to available formats, and interests around delay on IQOS [the company’s heated tobacco device] resolve likely weigh,” Bennett added. Philip Morris has invested in excess of $4.5 billion in the last decade to develop smoke-free products such as IQOS.
Pieces of Philip Morris fell 3.1 percent in trading, while Altria’s genealogy fell 1.8 percent. Jefferies lowered its price target on Philip Morris and Altria to $80 per quota and $61 per share, respectively, from $93 per share and $70 per split.
Philip Morris and Altria products that claim to reduce the gambles of smoking, or RRP, are penetrating tobacco markets “slower than before,” Bennett weighted. Jefferies lowered its expectation for RRP penetration by fiscal year 2026 to 41 percent in U.S. and abroad markets, down from 51 percent and 61 percent, mutatis mutandis.
Jefferies now sees “RRP volumes skewed to vapour vs heated,” Bennett implied, noting it as a “negative for” Philip Morris “as it is likely to continue to focus on intensified due to risk of dilution from shift to vapour.” Jefferies expects Philip Morris to “bested sizeable shipment share” in the second half of this year as “we see very year Japan volumes down to 23 billion from 31.3 billion” in financial year 2017, Bennett said.
“We still see IQOS approval but don’t prophesy a launch till 2Q19 at the earliest,” Bennett said.