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Investing.com - Jefferies initiated coverage on British American Tobacco (NYSE:BTI) with a Buy rating and set a price target of GBP48.00, according to a research note released Wednesday. The company, currently valued at $104.7 billion, has demonstrated strong momentum with a 36.65% return year-to-date.
The investment firm identified British American Tobacco as its top pick in the tobacco sector, citing the company’s improving profitability in its traditional combustibles business, which supports its transition toward smoke-free products.
Jefferies highlighted the company’s "strong foothold" in smoke-free products with potential for further expansion, alongside a strengthening balance sheet and substantial cash returns to shareholders.
The research note pointed out that British American Tobacco currently trades at a 35% discount compared to the wider tobacco sector, a gap that Jefferies believes should narrow in the future.
British American Tobacco, which trades on both the London Stock Exchange (LON:LSEG) (BATS:LN) and the New York Stock Exchange, has been expanding its portfolio beyond traditional cigarettes as consumer preferences shift toward alternative nicotine products.
In other recent news, British American Tobacco has completed the sale of a 2.5% stake in Indian conglomerate ITC (NSE:ITC) for approximately $1.42 billion, exceeding initial expectations. The sale involved 313 million shares and was executed through an accelerated book-build process. The company plans to use the proceeds to expand its share buyback program by an additional 200 million pounds, bringing the total buyback amount to 1.1 billion pounds for the year. In a separate development, Deutsche Bank (ETR:DBKGn) raised its price target for British American Tobacco shares to £38.00, maintaining a Buy rating, following a positive revenue projection for the first half of 2025.
Additionally, BofA Securities reiterated a Buy rating with a price target of £39.00, noting a slight increase in full-year 2025 revenue guidance. The trading statement from British American Tobacco highlighted a slight improvement in U.S. combustibles and strong growth in its modern oral product, VELO. However, the company’s vapor performance fell short of expectations, impacting revenue growth in its New Categories segment. Despite this, management remains optimistic about achieving mid-single-digit revenue growth for the full year. Meanwhile, Reynolds American (NYSE:RAI), a subsidiary of British American Tobacco, announced it will discontinue its diversity, equity, and inclusion initiatives, following discussions with activist Robby Starbuck.
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