According to Morgan Stanley, Altria Group’s shares could suffer due to inflation. Morgan Stanley downgraded Altria from equal to underweight on Wednesday. From $54, the firm lowered its price target by $50 to $50. Altria closed Tuesday’s close at $54 and the new projection indicates a 7.4% decline in price. In a note, Pamela Kaufman from Morgan Stanley said that she expects greater pressures due to rising gas prices as well as weaker consumer sentiment. This should impact cigarette volumes and increase trade down risk. With inflation near decades-long highs and national gas prices averaging close to $5 per gallon , consumers who typically would reach for a pack of Marlboros — one of Altria’s brands — may cut costs on cigarettes. Kaufman explained that “smokers tend to be lower income, and are therefore more affected by rising food and fuel prices.” Morgan Stanley reports that there’s been an inverted correlation between gas prices and the volume of cigarette sales. According to the firm, Philip Morris International’s proposed acquisition of Swedish Match may also negatively affect Altria. Morgan Stanley estimates that the acquisition will be a headwind for Altria’s market capital of between 7% and 14%. —CNBC’s Michael Bloom contributed reporting.
