British American Tobacco P.L.C. (NYSE: $BTI)

British American Tobacco P.L.C. Logo

British American Tobacco P.L.C. (NYSE: $BTI) is a global consumer goods business. The company offers a range of products in tobacco, nicotine, and more. It sells its products in five main categories: heated tobacco, vapor, traditional oral, modern oral, and combustible cigarettes.

Stock Performance

British American Tobacco has had a rough year. The stock is down 28.64% year-to-date. Additionally, it has lost 31.33% of its value in the past 12 months. At the close of the last trading session, the stock was down 8.50%, trading at $28.86 per share.

One reason the stock has fallen is the revelation in its December 6, 2023, full-year pre-close trading update. In the update, BAT said it delivered FY23 EPS in line with their guidance. It also stated that the company had continued to post strong growth in New Categories, with Vuse and Velo leading the push.

However, it was not all good news. The company revealed that it was writing down the value of its brands by $31.5 billion. It blamed the move on macroeconomic pressure and the shift from combustible cigarettes to vaping.

The write-down was based on re-assessing the useful economic life over 30 years for some of their brands, mainly in the US. Affected brands include Natural American Spirit, Newport, Camel, and Pall Mall.

The revelation vindicates analysts who felt British American Tobacco overpaid for Reynolds America, which it bought in 2017 for $49 billion. At the time, the merger led to the creation of the world’s biggest publicly traded tobacco firm. However, BAT clarified that the write-down would not affect their daily operations. Nevertheless, investors reeled at the revelation, with the stock falling to its lowest point in a decade at one point during trading.

The downward slide will likely continue during normal trading as the stock is down 0.55% in pre-marketing trading as of December 7, 2023. It signals that investors have lost confidence in the company’s long-term performance.

British American Tobacco Stock Forecast

In its pre-close trading update, BAT said that its revenue was expected to rise this year by 3%-5%. That would be better than the global sales from the tobacco sector, which are poised to drop by 3% in 2023. However, the $31.5 billion write-down caught most investors’ attention.

However, its finances still look strong, with huge opportunities for growth. For instance, BAT CEO Tadeu Marroco pointed out that only 10 percent of the world’s one billion tobacco consumers use non-combustible products. Consequently, there is huge room to grow.

Analysts give BTI stock a moderate buy rating. It signals that they believe the stock will perform better than the rest of the stock market in the coming 12 months. They give the stock a high price target of $38 and a low target of $33. The stock’s average price target is $35.50, a 23.01% upside from its closing price of $28.86.

Should You Buy BTI Stock?

BAT is one of the leading players in the tobacco industry, with a market cap of $70.622 billion. While a lot of focus is on the recent write-down; that will not affect its near-term performance. However, its push to replace combustible cigarettes with alternatives will take work. Consequently, the company is likely to lose customers in the long term.

For dividend investors, BTI stock is a good option. The company pays some of the highest yields, at nearly 10%. However, earnings will likely face headwinds as tobacco use continues to fall.

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