Why the Dip in Altria is a Buying Opportunity

NYSE: MO | Altria Group, Inc. News, Ratings, and Charts

MO – While some tobacco companies might be affected by the Biden administration’s potentially tougher regulations on nicotine content in cigarettes, Altria (MO) is favorably positioned to thrive thanks to its diversified portfolio of products. So, because the stock has declined lately on overall negative sentiment about the tobacco industry, we think now could be a good investment entry opportunity into MO. Read on.

Shares of Fortune 200 company Altria Group, Inc. (MO) have s gained 19.8% over the past year. The company manufactures and sells cigarettes, oral tobacco products and wine through its subsidiaries, which include Philip Morris USA Inc., John Middleton Co. and UST LLC.  And, as the tobacco industry attempts to change for the better, MO is increasing its focus on harm reduction and informed consumer choice.

MO’s stock has declined 9.4% since hitting its peak of $52.38 on April 16 on the rumors that the Biden administration may introduce tougher tobacco-company regulations. However, thanks to its diversified portfolio, the stock is expected to rebound in the coming months.

So, we think the price dip has created a perfect buying opportunity for investors. Furthermore,  MO has authorized a $2 billion share repurchase program, which is expected to be completed by June 30, 2022.

Here’s what we think could shape MO’s performance in the near term:

Well-Positioned to Flourish Even Under Tougher Regulations

Several reports have surfaced over the past few days that the Biden administration may force tobacco companies to slash the level  of nicotine content in cigarettes. The U.S. Food and Drug Administration (FDA) is also expected to rule on menthol cigarettes by the end of this month. MO is well-positioned to thrive even under tougher tobacco regulations because  its portfolio also includes non-combustible products, and the company has investments in leading products across heat-not-burn, moist smokeless tobacco and oral nicotine pouches, and the e-vapor segments.

In fact, in December 2020, the FDA authorized the commercialization of the next generation of the IQOS tobacco heating system devices, the IQOS 3. MO is  preparing for a time when adult smokers will choose non-combustible tobacco products over cigarettes, which is an important part of its 10-year vision.

Robust Financials

For the fiscal 2020 fourth quarter, ended December 31, 2020, MO’s revenue from the smokable products segment increased 7.9% year-over-year to $5.57 billion,  while its revenue from the oral tobacco products segment increased 4.5% year-over-year to $632 million. Its revenues, net of excise taxes, climbed 5.3% year-over-year to $5.06 billion in the fourth quarter.

The company’s operating income for the quarter was  $2.58 billion, up 6.3% year-over-year. MO’s net earnings  came in at $1.92 billion compared to a net loss of $1.81 billion in the prior-year period.

Consensus Price Target Indicates Solid Upside

MO is currently trading at $47.22 and Wall Street analysts expect the stock to hit $52.63 in the near term, which indicates a potential upside of 11.5%.

POWR Ratings Show Promise

MO has an overall B rating, which equates to Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight different categories. Among  these categories, MO has a B grade for Momentum. This is consistent with its 22.4% gains over the past six months and 11.8% returns over the past three months.

The  stock has an A grade for Quality, which is  sync with its trailing-12-month 64.7% gross profit margin, which is much higher than the 35.4% industry average. Its 98.4% trailing-12-month return on common equity and 9.4% trailing-12-month return on total assets are also higher than their respective industry averages.

MO is ranked #4 of 11 stocks in the A-rated Tobacco industry. Click here to access MO’s ratings for Growth, Value, Stability, and Sentiment as well.

If you’re looking for other top-rated stocks in the Tobacco industry with an Overall POWR Rating of A or B, you can access them here.

Bottom Line

As a n established player in the tobacco space, MO is expected to thrive this year and beyond because it continues to evolve with changing market demand. Its stock fell  because of the rumors over tougher regulations. However, the stock is expected to recover in the near term as prices of several consumer goods, including cigarettes, increase with an  economic recovery. So, we believe investors should not miss the opportunity to buy shares of MO now.


MO shares were trading at $47.15 per share on Tuesday afternoon, down $0.07 (-0.15%). Year-to-date, MO has gained 16.99%, versus a 12.05% rise in the benchmark S&P 500 index during the same period.


About the Author: Manisha Chatterjee


Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst. More...


More Resources for the Stocks in this Article

TickerPOWR RatingIndustry RankRank in Industry
MOGet RatingGet RatingGet Rating

Most Popular Stories on StockNews.com


:  |  News, Ratings, and Charts

Top 10 Value Stocks

The S&P 500 (SPY) has shown mixed results in the last week, but if you are a value investor, then yesterday was a big day. That’s when we revealed to our readers the fatal flaws of traditional value investing and the solution to this problem—our Top 10 Value Stocks strategy. Read on below to find out more about this 3-step process and its +38.63% annual returns…

:  |  News, Ratings, and Charts

4 Top-Rated Tech Stocks to Enhance Your Portfolio

The investor rotation away from technology stocks is expected to be short-lived owing to the unabated demand for advanced technology products and services. Therefore, we think some of the biggest names in the tech industry, specifically Intel (INTC), International Business Machines Corporation (IBM), Panasonic (PCRFY), and Canon (CAJ) are solid bets at their current price levels. Read on for an explanation.

:  |  News, Ratings, and Charts

2 Casino Stocks Wall Street Loves

The easing of pandemic distancing restrictions facilitated by mass vaccinations is allowing casinos and related entertainment companies to reopen at 40-50% capacity. This, coupled with the rising popularity of online gambling, is fostering optimism among Wall Street analysts about the upside potential of Penn National Gaming (PENN) and Melco Resorts & Entertainment (MLCO). Read on.

:  |  News, Ratings, and Charts

4 Buy-Rated Financial Stocks to Snatch Up in May

Financial sector stocks have been making an impressive comeback in lockstep with the economy’s recovery. So, we think investing in the stocks of fundamentally sound Goldman Sachs (GS), Lazard (LAZ), Piper Sandler (PIPR), and Cowen (COWN) could pay off handsomely in the near term.

:  |  News, Ratings, and Charts

2 Casino Stocks Wall Street Loves

The easing of pandemic distancing restrictions facilitated by mass vaccinations is allowing casinos and related entertainment companies to reopen at 40-50% capacity. This, coupled with the rising popularity of online gambling, is fostering optimism among Wall Street analysts about the upside potential of Penn National Gaming (PENN) and Melco Resorts & Entertainment (MLCO). Read on.

Read More Stories

More Altria Group, Inc. (MO) News View All

Event/Date Symbol News Detail Start Price End Price Change POWR Rating
Loading, please wait...
View All MO News