Citi raises British American Tobacco target to £36.00, keeps Buy

On Monday, Citi analysts increased the price target for British American Tobacco (NYSE:BTI) shares (BATS:LN) (NYSE: BTI) to £36.00, up from £32.00, while reaffirming a Buy rating on the stock. The decision follows a December trading update which, according to the analysts, has lessened the risks associated with the company’s full-year results. British American Tobacco is expected to deliver low single-digit growth in full-year 2024 organic sales (consensus at +1.1%) and organic operating profit (+1.9%).

The analysts project that for the fiscal year 2025, the consensus estimates for organic growth are well-positioned, with an anticipated gradual improvement towards the 2026 targets of 3-5% organic sales growth and mid-single-digit organic operating income growth. Current consensus for FY25E suggests organic sales growth at +1.5% and organic EBIT (earnings before interest and taxes) at +2.7%.

Despite strong year-to-date outperformance by British American Tobacco’s stock, Citi analysts believe there are several factors that could continue to support the stock price. These include foreign exchange driven consensus EPS (earnings per share) upgrades, which Citi has increased by 2% in their report; potential slowing of declines in US combustible products; opportunities arising from increased enforcement against illegal vaping products under the Trump administration; and the potential increase of British American Tobacco’s share buyback program.

In light of these considerations, Citi has adjusted its estimates slightly, moved forward with its discounted cash flow (DCF) analysis, and raised the target price to £36.00 while reiterating its Buy rating. The analysts’ commentary underscores their positive outlook on British American Tobacco’s future performance and stock potential.

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