The research and development campus of Philip Morris International, in Neuchâtel, western Switzerland.
Fabrice Coffrini/AFP via Getty Images
Philip Morris International is edging higher, helped in part by an endorsement from Piper Sandler. The firm thinks the stock can rise nearly 40%, thanks to its cigarette alternative business.
Analyst Michael Lavery reiterated an Overweight rating on Philip Morris (PM) on Wednesday while raising his target for the stock price to $110 from $98. He says the long-term outlook is bright for the tobacco giant, especially as adoption of its heat-not-burn product iQOS has been gaining momentum throughout the Covid-19 pandemic.
Philip Morris shares sold off after its recent third-quarter report, and some investors may have been concerned that iQOS showed declines in market share in Russia and some European markets. However, Lavery isn’t worried, chalking that up to seasonal factors and saying the product’s “underlying momentum remains strong.”
He thinks that consumers are continuing to respond well to iQOS, even if more volatility may appear in future quarters.
Lavery estimates that the product’s share in Russia could climb to 6.4% by the end of the year, up from 5.8%, and that the figure could climb to 8.7% in early 2021. He also thinks iQOS could accelerate its share gains in Europe, rising from 3.9% of the market in recent quarters, to 5.4% next year.
Overall, Philip Morris has added one million iQOS users per quarter since the start of 2019, he wrote, helped by the company’s investments in marketing and strong showing during the pandemic. Its growing scale should reduce customer-acquisition costs fall, boosting profits. At the same time, iQOS should continue to enjoy tax advantages over traditional cigarettes, which should benefit margins, he said.
Philip Morris is up 0.3% to $78.62 in recent trading.
Write to Teresa Rivas at [email protected]
