Imperial Brands share price outperforms as RBC turns bullish on stock

on Aug 21, 2017

Shares in Imperial Brands (LON:IMB) have gained ground in London in today’s session, outperforming the broader UK market, as RBC Capital Markets turned bullish on the tobacco group. The analysts argue that the stock’s recent underperformance provides ‘an excellent buying opportunity’.

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As of 13:31 BST, Imperial Brands’ share price had added 0.95 percent to 3,199.50p, outperforming the FTSE 100 which has inched 0.04 percent higher to stand at 7,326.94 points. The group’s shares have lost more than 21 percent of their value over the past year, as compared with a more than six-percent rise in the benchmark index.

RBC lifted its rating on Imperial Brands from ‘sector perform’ to ‘outperform’ today, and hiked its valuation on the shares from 3,500p to 3,600p. Sharecast quoted the analysts as explaining that the stock’s 20-percent underperformance year-to-date meant that the upside implied by the average consensus price target was the highest it has seen over the last five years, throwing up ‘an excellent buying opportunity’.

The broker noted that worries about Imperial’s ability to hit its medium-term target of organic revenue growth of between one percent and four percent went a long way in explaining its weak share price performance, with the regulatory announcement on 28 July providing an extra leg down. Shares in Imperial Brands and peer British American Tobacco (LON:BATS) were sold off after the US Food and Drug Administration (FDA) unveiled plans to reduce nicotine levels in cigarettes to non-addictive levels. 

The 17 analysts offering 12-month price targets for Imperial Brands for the Financial Times have a median target of 4,100.00p, with a high estimate of 4,600.00p and a low estimate of 3,500.00p. As of August 18, the consensus forecast amongst 20 polled investment analysts covering the blue-chip group has it that the company will outperform the market.