Altria (NYSE:MO) is one of the most divisive titles in the stock market. As a major producer of cigarettes, its continued existence is controversial in a world that has become more health-conscious and aware of the dangers of tobacco. On the other hand, the company’s traditionally strong financial performance and high-yield dividend have attracted numerous investors over the years.
It’s safe to say that more people took notice recently when a Wall Street analyst who follows Altria increased her rating of it.
The news broke before the trading day started on December 6 Bank of AmericaLisa Lewandowski had changed her view of Altria. She is now convinced it is a buy, while previously she had rated the tobacco stocks as neutral. She also raised her target price significantly, from $55 per share to $65. That new level is almost 19% higher than the stock’s closing price on December 11.
According to reports, Lewandowski’s move was based on several factors. According to her, the incoming Republican presidential administration will implement policies that will benefit Altria, such as tariffs on foreign producers of a range of products and a possible reduction in corporate tax rates.
The analyst also expects that better economic prospects for lower-income consumers could undermine the retail convenience sector. Since convenience stores are active and busy sellers of tobacco products, this could support Altria’s business. Finally, Lewandowski believes the market has not yet fully priced the benefits of management’s cost-cutting program into the stock.
The billion-dollar question for Altria is whether it will be able to get past the significant headwinds pushing against it.
This – it is almost self-evident now – is the steep, ongoing decline in cigarette smoking in major markets like the US. While growth in the use of next-generation products such as vaping products is filling the sales gap somewhat, they have not. It did not achieve the popularity that cigarettes had in their heyday. Altria and its peers will have to continue working hard to convince investors that such goods have a bright future.
Consider the following before purchasing shares in Altria Group:
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