Morgan Stanley says that Altria Group, a tobacco company could experience shares decline as customers pay more for inflation. Morgan Stanley lowered Altria’s weight to equal from underweight Wednesday. Morgan Stanley lowered its price target from $54 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 stated that smokers tend to be low-income consumers who are more affected by high food and gas 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 rates the potential acquisition as an Altria market headwind of 7%-14%. —CNBC’s Michael Bloom contributed reporting.
