Shares of tobacco and nicotine products provider British American Tobacco (NYSE:BTI) are inching upward in the pre-market session today. This comes after the company launched heat sticks that contain nicotine-infused Rooibos tea instead of tobacco in nine markets across Europe. A further global rollout of the sticks is also planned, according to Reuters.
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As a ban on flavored heated tobacco products looms in Europe, tobacco companies have turned to heat sticks to offer a new way of inhaling nicotine. Since heavy taxes and increasing health awareness have impacted the demand for traditional cigarettes, the heat sticks have helped companies offset the drop in demand in some markets.
While BTI noted that the new offering provides users a wider range of products with lower risks, researchers have warned that the products may pose yet unknown risks, according to the report. Philip Morris (NYSE:PM), too, is expected to introduce zero-tobacco sticks later this year.
A key aspect that tobacco companies seem to be banking on is that zero-tobacco sticks do not fall under the European Union’s tobacco rules. This implies companies can offer non-tobacco sticks in different flavors even after flavored heated tobacco products are banned across the EU later this month. A caveat, though, is that these regulatory advantages may not last for long.
What is the Future of BTI Stock?
Meanwhile, the Street has a Hold consensus rating on British American Tobacco. The average BTI price target of $33 implies a 10.8% potential upside. That’s after a nearly 20.3% slide in the share price over the past year.
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