The World Health Organization (WHO) has sought urgent action to limit the use of e-cigarettes. While e-cigarettes are banned in 34 countries, 74 countries have zero regulations for these products. The apex healthy body noted that nicotine-containing e-cigarettes are extremely addictive, and some of the toxic substances generated by these products may lead to elevated risk of cancer and lung disorders.
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The WHO’s strict stance once again brings tobacco majors such as British American Tobacco (NYSE:BTI), Altria Group (NYSE:MO), and Philip Morris International (NYSE:PM) into focus. The WHO highlighted the rising use of e-cigarettes among children and adolescents, noting, “The tobacco industry profits from destroying health and is using these newer products to get a seat at the policy-making table with governments to lobby against health policies. The tobacco industry funds and promotes false evidence to argue that these products reduce harm.”
Amidst rising regulatory action and public scrutiny, these tobacco giants have focused on weaning away from combustible tobacco products over the past few years. Concurrently, the industry has pivoted toward vaping, smoke-free, and nicotine products to keep its growth engine humming. Recently, the U.K. moved towards creating its first smoke-free generation. The country’s government plans to raise the legal age for smoking each year, aiming to make England smoke-free by 2030.
The industry is slowly coming to terms with the new market reality. Earlier this month, BTI took a nearly $31.5 billion impairment charge on some of its brands. The company is aiming to command a 50% market share in the non-combustibles category. Altria saw its Q3 top line take a hit from higher promotions and lower volumes. The company has now lowered its financial outlook for the full year.
Which Tobacco Share Is Best?
In a sign of the changing market dynamics, shares of BTI and MO are down by double-digits over the past five years. Despite this underperformance, the Street sees a limited upside in these names. The TipRanks Comparison Tool indicates the highest upside potential of 18% in BTI with an average price target of $35.50.
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