Is Altria Group a buy or sell in January?

By: Stanko Iliev
Stanko Iliev
Stanko dedicates himself to providing investors with relevant information they can use to make investment decisions. He loves the… read more.
on Dec 30, 2020
  • Altria Group shares remain attractive for long-term oriented investors
  • Bank of America has a buy rating on Altria with a price objective of $50
  • Altria Group offers earnings stability and an attractive dividend yield

Altria Group (NYSE: MO) shares didn’t change too much in the last several months, and the current price stands around $40. Bank of America has a buy rating on Altria, and shares of this company continue to be teed up as a potential smart play for investors to consider in 2021.

Fundamental analysis: Altria Group offers earnings stability

Altria Group is an American corporation and one of the world’s largest producers and marketers of tobacco, cigarettes, and related products. Altria Group operates worldwide but has headquartered in Virginia and it is also important to mention that Altria Group is previously known as Philip Morris Companies.

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Altria Group has a positive risk/reward profile, and shares of this company continue to be teed up as a potential smart play for investors to consider in 2021. Altria Group reported Q3 results at the end of October; total revenue has increased by 4.8% Y/Y to $5.67B while Q3 GAAP EPS was -$0.51 (misses by $1.66).

Total revenue has increased above the expectations (+ $140M), and the company declared a $0.86/share quarterly dividend. Altria expects full-year EPS to be around $4.38, which is very good; the dividend yield is around 8.4%, making the stock attractive for income investors.

The company has a long-term objective of a dividend payout ratio target of approximately 80% of adjusted diluted EPS and keeps its annualized dividend payout at $3.44 per share. Another positive fact is that Bank of America has a buy rating on Altria with a price objective of $50.

“MO offers earnings stability, an attractive yield, and a valuation near historic lows. Our $50 PO values MO at 10.8x our 2021E EPS of $4.61 and represents a near 15-20% disc to its July 2017 to date (12.7x) forward PE avg (post-FDA’s reinvigorated regulatory policy), which we see as warranted given FDA/FTC/JUUL concerns partly offset by its earnings power/yield,” said an analyst from Bank of America.

Altria Group shares didn’t change too much in the last several months, and at the current stock price, this company is not overvalued.

Technical analysis: Altria Group shares remain attractive for long-term oriented investors

Altria Group offers earnings stability, and the shares of this company remain attractive for long-term oriented investors.

Data source: tradingview.com

The critical support levels are $40 and $36; $44 and $50 represent the resistance levels. If the price jumps above $44, it would be a signal to buy Altria Group shares, and the next target could be around $50.

On the other side, if the price falls below the $36 support level, it would be a firm “sell” signal, and the next target could be around $32.

Summary

Altria Group is facing the current covid crisis relatively well, and shares of this company remain attractive for long-term oriented investors. Total revenue has increased above the expectations in Q3, and Bank of America has a buy rating on Altria with a price objective of $50. If the price jumps above $44, it would be a signal to buy Altria Group shares, and the next target could be around $50.

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