British American Tobacco p.l.c. (NYSE:BTI) finds itself at the center of divergent opinions from two major financial firms, Morgan Stanley and Jefferies, regarding its future prospects. On December 10, 2023, analyst Rashad Kawan from Morgan Stanley raised the price target for BTI from 3,000 GBp to 3,050 GBp, while maintaining an Underweight rating on the shares. In contrast, Jefferies has taken a more optimistic view, naming BTI as its top pick within the global tobacco sector.
The contrasting assessments reflect differing confidence levels in BTI’s strategic pivot towards a smoke-free, product-focused portfolio. Jefferies analyst Andrei Andon-Ionita expressed strong support for the company, citing a sustainable transformation that remains undervalued by the market. He noted that BTI’s ongoing shift is crucial, as it may not yet be fully represented in the current share price.
Market Dynamics and Strategic Growth
Andon-Ionita outlined several factors bolstering the investment case for BTI. He highlighted accelerating market share gains in the U.S. modern oral segment, alongside early signs of improvement in both volume and pricing for BTI’s Vuse business. Additionally, he indicated a solid outlook for traditional combustibles as the company heads into 2026.
Particularly noteworthy is the performance of the Velo Plus product, which has seen over 300% growth in both volume and value, establishing itself as a significant driver of category expansion in the U.S. market. Andon-Ionita remarked, “We see further upside from innovation and regulatory enforcement in U.S. eVapor, while also highlighting the resilience of the combustibles business, which continues to deliver robust cash flow and margin expansion despite ongoing volume declines.”
Financial Outlook and Market Position
British American Tobacco operates as a multinational corporation, manufacturing and selling a variety of tobacco and nicotine products across global markets. The company’s strong balance sheet provides it with the flexibility to return substantial cash to shareholders, further enhancing its attractiveness as an investment.
While acknowledging the potential of BTI, Morgan Stanley’s Kawan maintains a cautious outlook, suggesting that other stocks, particularly in the artificial intelligence sector, may offer greater promise for higher returns with limited downside risk. This perspective highlights the competitive landscape in investment opportunities, urging investors to weigh their options carefully.
As the tobacco industry continues to evolve, British American Tobacco’s strategic initiatives and market performance will be closely monitored by analysts and investors alike. The differing views from Morgan Stanley and Jefferies underline the complexities and challenges inherent in evaluating this multinational company’s future trajectory.
