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Altria Group
inventory fell Wednesday after Morgan Stanley warned of accelerating headwinds to the cigarette business.
Analyst Pamela Kaufman downgraded her ranking of the cigarette firm to Underweight from Equal Weight and lowered her worth goal to $50 from $54. She cited shopper constraints as a consequence of growing fuel costs and competitors from different main tobacco producers as causes for the bearish view.
Shares for
Altria
(ticker: MO) slid 6.7% Wednesday to $50.37, whereas the
S&P 500
slipped 0.5%. The inventory has climbed 6.3% this yr.
People who smoke are likely to skew towards low-income customers, who’re most affected by rising fuel and meals costs, Kaufman mentioned in a analysis notice.
“Traditionally, there was a powerful inverse relationship between fuel costs and cigarette volumes,” Kaufman wrote. “We anticipate decrease cigarette consumption as customers search for financial savings, with merchandise bought at fuel stations significantly weak.”
Individually
Philip Morris Worldwide
(PM), one other tobacco merchandise maker and a direct competitor of Altria, agreed to purchase Swedish Match again in Might. Kaufman mentioned “the market is underappreciating the danger” the deal poses to Altria, as it should enable Philip Morris to “to enter the U.S. market immediately with IQOS in 2024.”
IQOS is a heated tobacco system which is marketed as a substitute for conventional smoking.
The Morgan Stanley downgrade is presently the one adverse ranking of Altria’s inventory. The cigarette firm has one Promote ranking, six Maintain rankings, and 4 Purchase rankings, in keeping with analysts polled on FactSet.
Write to Angela Palumbo at angela.palumbo@dowjones.com~With Teresa Rivas
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