Should I buy Altria Group shares after a positive view from Bank of America?

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 5, 2021
  • Altria Group shares remain under pressure
  • Bank of America has a positive view
  • Altria Group raised full-year 2021 guidance

Altria Group, Inc. (NYSE: MO) shares have weakened from $52.59 to $42.53 since March 26, 2021, and the current price stands at $43.92.

Bank of America has a positive view

Altria Group is an American corporation and one of the world’s largest producers and marketers of tobacco, cigarettes, and related products.

Are you looking for fast-news, hot-tips and market analysis? Sign-up for the Invezz newsletter, today.

Altria Group has a strong demand for its products, and the company reported solid third-quarter results in October.

Total revenue has decreased by 2.5% Y/Y to $5.5 billion, slightly above expectations, while the non-GAAP EPS for the third fiscal quarter was $1.22 (misses by $0.04).

During the third-quarter earnings report call, the company’s management raised full-year 2021 guidance and announced that adjusted diluted EPS for the 2021 fiscal year should be between $4.58 to $4.62.

This represents a growth rate of 5% to 6% compared with the 2020 year, and the company continues to maximize profitability from its core tobacco businesses.

Bank of America upgraded Altria Group shares last week and assigned a buy rating. This comes after the Biden Administration confirmed that it would not take any action regarding the Altria Group and Philip Morris patent infringement litigation with British American Tobacco after a 60-day review of the U.S. International Trade Commission’s decision.

According to Lisa K. Lewandowski, an analyst from Bank of America, the risk-reward ratio remains positive, and Altria is well-positioned to lead the transition from combustibles to smoke-free and potentially lower-risk products.

Altria Group trades at less than seven times TTM EBITDA, the current dividend yield is above 8%, and with a market capitalization of $80.8 billion, shares of this company can be a good choice for long-term investors.

Several months ago, Morgan Stanley reported that Philip Morris could continue with the strategy of acquiring companies, and a revisiting of the merger discussions with Altria is also seen as an option.

Jacek Olczak, CEO of Philip Morris International, said in November that the “chapter with Altria is closed” at the paper’s Financial Times Global Dealmaking Summit.

On the other side, the Coronavirus pandemic continues to pose downside risks, and if the situation gets worse, Altria Group will not achieve its goals. Sal Mancuso, CFO of Altria Group, added:

We estimate that compared to pre-pandemic levels, the number of tobacco consumer trips to the store continued to be depressed. We continue to monitor tobacco consumer behaviors, and we will provide our insights on the factors impacting those behaviors as we move forward.

$45 represents current resistance

Altria Group’s stock price has fallen more than 15% after reaching the highest level in 2021 of $52,59 on March 26.

Data source: tradingview.com

The strong support level stands at $40, and if the price falls below this level, it would be a strong “sell” signal.

On the other side, if the price jumps above $45 resistance, it would signal trading shares, and the next target could be at $47 or even above.

Summary

Altria Group raised full-year 2021 guidance and announced that adjusted diluted EPS for the 2021 fiscal year should be between $4.58 to $4.62. Bank of America upgraded Altria Group shares last week and assigned a buy rating.

Where to buy right now

To invest simply and easily, users need a low-fee broker with a track record of reliability. The following brokers are highly rated, recognised worldwide, and safe to use:

  1. Etoro, trusted by over 13m users worldwide. Register here >
  2. bitFlyer, simple, easy to use and regulated. Register here >