BofA says Altria ‘less of a drag’, upgrades to Buy

BofA Friday upgraded Altria (NYSE:MO) to Buy from Neutral and raised its price objective by $10 to $65, citing a few key themes that the brokerage thinks should bolster sentiment and hold potential for positive earnings revisions.

Most notably Republican administration priorities, which include lower corporate tax rate, tariffs and tighter border controls, along with any improvement in lower-income consumer wallets could re-charge the convenience channel (~70% of MO’s cigarette volume) helping MO’s top line, the brokerage said.

BofA further added that a rising market could continue to lift value stocks.

With the stock currently trading at average valuation and positive earnings potential, it sees a favorable risk reward heading into ’25.

MO’s current tax rate of 24-25% would benefit from any cut in corporate tax rate (currently 21% following the Tax Cuts and Jobs Act of 2017), Federal excise tax rates on cigarettes likely kept in check, any reduction in fuel prices is generally considered a positive for nicotine user wallets, along with a tighter immigration policy could lead to higher wages for lower income American workers, many of which are users of nicotine.

Additionally, most legal & illicit vapes are produced in China. A tighter border policy at the ports could help stem incoming illicit flavored vapes, which could help the legal producers such as Altria (MO), analysts noted.

The brokerage added that while President-elect Donald Trump has vowed to “save vaping”, it remains unclear what that entails.

In other news, UBS also sees the Republican win as a slight positive for tobacco stocks in its first post-election analysis. Analyst Faham Baig reminded investors that Republican control has historically been seen as a positive for U.S. tobacco, due to the likelihood of reduced regulation.