The analyst highlighted that the revised price target also considers a re-rating of the wider tobacco sector since the last update. Additionally, the new ADR price target includes the impact of USD/GBP foreign exchange movements that have occurred since the previous evaluation.Despite the increased price target, Morgan Stanley (NYSE:MS) maintains a cautious perspective on British American Tobacco (NYSE:BTI), citing specific challenges in the company's U.S. operations.
For a deeper understanding of BTI's financial health and future prospects, InvestingPro subscribers can access the comprehensive Pro Research Report, which includes detailed analysis of the company's fundamentals, peer comparisons, and growth prospects.
For a deeper understanding of BTI's financial health and future prospects, InvestingPro subscribers can access the comprehensive Pro Research Report, which includes detailed analysis of the company's fundamentals, peer comparisons, and growth prospects.
The analyst highlighted that the revised price target also considers a re-rating of the wider tobacco sector since the last update. Additionally, the new ADR price target includes the impact of USD/GBP foreign exchange movements that have occurred since the previous evaluation.
Despite the increased price target, Morgan Stanley maintains a cautious perspective on British American Tobacco, citing specific challenges in the company's U.S. operations. These challenges include a weak macroeconomic environment and a lack of enforcement against illicit e-cigarettes.
Such factors are expected to lead to continued weak growth for BAT (LON:BATS) compared to its peers. Furthermore, the analyst pointed out that higher leverage could affect the company's capital allocation decisions, potentially impacting share buybacks starting from FY26. For a deeper understanding of BTI's financial health and future prospects, InvestingPro subscribers can access the comprehensive Pro Research Report, which includes detailed analysis of the company's fundamentals, peer comparisons, and growth prospects.
The analyst highlighted that the revised price target also considers a re-rating of the wider tobacco sector since the last update. Additionally, the new ADR price target includes the impact of USD/GBP foreign exchange movements that have occurred since the previous evaluation.
In other recent news, the U.S. Food and Drug Administration (FDA) is reportedly pushing for a significant reduction in nicotine content in cigarettes, a proposal that has led to a slight decline in the stocks of Altria Group (NYSE:MO) and Philip Morris International (NYSE:PM). The FDA's initiative aims to reduce the appeal of cigarettes, assist smokers in quitting, and further decrease smoking rates. This proposal, however, faces a potential challenge from the tobacco industry, including companies like Reynolds American (NYSE:RAI).
On a different note, British American Tobacco's stock rating remains Neutral according to UBS, despite the firm raising its price target. UBS acknowledged the company's efforts in innovation and competitiveness, particularly in the U.S. market. However, they also noted challenges such as the expansion of Chinese vape manufacturers into global markets and issues in the U.S. market.
Further, British American Tobacco faces complications from Canadian litigation, anticipated to negatively impact the company's earnings per share (EPS), according to UBS. These factors could potentially reignite discussions about British American Tobacco's 25.5% stake in ITC (NS:ITC), suggesting that the company might reduce its stake to strengthen its balance sheet.
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