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(Sharecast News) - Analysts at Jefferies slashed their target price on tobacco giant British American Tobacco from 4,700.0p to 4,100.0p on Monday, stated "a lot of bad" was priced in and that risk was arguably skewed to the upside.
Jefferies said current sentiment on British American was probably the worst it has seen it in 13 years covering the name, with recent updates "just adding to concerns".
The broker pointed to a recent worsening of BATS' share of the US cigarette market, upcoming rule changes to menthol and nicotine products by the Food and Drug Administration, the status of its premarket tobacco application decision, a patent dispute in one of its vape businesses, and its recent full-year results as being reasons for skepticism.
However, with that said, Jefferies also admitted that it remains bullish on the stock over the longer term and reiterated its 'buy' rating on the shares.
"While PMTA approval may now be a 2024 event, with expected combined FY23 earnings and yield at double digit, and multiple risk now arguably skewed to the upside in the year ahead, near-term prospects are also still compelling," said Jefferies.
"FY23 EPS to 382.5p (before 394.1p, cons. 389.9p), EPS FX headwind of 1.0% (before +0.2%, cons. +1.1%, guide flat), and ex-FX growth of 4.0% (before 7.4%, cons. 3.9%, guide MSD). Ex-FX sales of 2.7% (before 4.1%, cons 3.5%), or 4.5% org ex Russia (guide 3%-5%), and EBIT 5.6% (before 6.2%, cons 5.5%)."
Reporting by Iain Gilbert at Sharecast.com
