Altria: No Reason To Panic On Rumored FDA Ban On Juul

(Preview) Company Update (MO US) (Buy)

Summary

• Altria shares fell 9.2% after reports of an upcoming FDA ban on Juul products, and now have an 8.9x P/E and an 8.7% Dividend Yield.

• We believe investors over-reacted. Any FDA ban may not be final, and some announced bans have already been overturned or stayed.

• Altria may actually stand to gain, as Juul's growth has been dilutive to its earnings, and other e-vapor companies may also face bans.

• E-vapor has had only a limited impact on U.S cigarette volumes in recent years. Our base case is U.S. cigarette volumes will remain stable.

• With shares at $41.50, we expect an exit price of $62 and a total return of 87% (22.7% annualized) by 2025 year-end. Buy.

Introduction

Altria Group Inc. shares fell 9.2% on Wednesday (June 23) after the Wall Street Journal reported that the FDA is preparing to order the removal of Juul e-cigarettes from the U.S. market, with a potential announcement this week.

Altria shares are now trading at just above their 52-week low, having fallen 27% from their peak in …