Sam Boughedda

Altria Group Shares of (NYSE:) tumbled by more than 7 percent Wednesday following the downgrading to Underweight stock shares by Morgan Stanley analyst Pamela Kaufman.

Kaufman also reduced the price target for Altria from $54 to $50, telling investors that they will be lowering their long-term forecasts due to the increasing competitive threat from PM’s SWMA acquisition.

Analyst said that in the near term, he anticipates greater gas price rises and weaker consumer sentiment. This will put pressure on cigarette volumes as well as increase risk of trade.

“MO shares have outperformed the S&P 500 by 27% YTD, and when adjusting for the 7% decline in ABI’s price in USD, MO’s core business is +29% YTD. Market may shift to a more defensive posture, but we view risk-reward as biased to the downside due to the combination of short-term fundamental pressures with our longer-term worries about MO’s cigarettes portfolio, RRP offering and PM’s possible SWMA acquisition.” Kaufman added.

They have reduced the price target for Altria to reflect IQOS’s entry to the US market in 2024. The firm sees a negative risk-reward ratio with a 24% upside to their $41 bear and 13% upside of their $61 bull cases.