British American Tobacco shares go up in smoke following update

Expectations have been lowered for e-cigarettes.

Article updated: 16 October 2018 9:00am Author: Graham Spooner

  • The company said it expected revenue from cigarette alternatives to reach £900m this year, down from a previous target of £1bn
  • Shares hit a 4-year low last week and have failed to bounce back sufficiently as shares fell 1.25% in response to the morning news
  • We recommend BAT as a ‘hold’ for lower to medium risk income-seeking investors

Cigarette company British American Tobacco (BAT) issued a trading update this morning cutting its full-year revenue target for next-generation products leading to a fall in the share price.

Shares are down 1.25% in early trading following the update, which cut expectations for revenue from e-cigarettes to £900 million from £1 billion. The group also reiterated that industry volume is likely to be around 3.5% lower this year.

The trading update follows last week’s fears of a crackdown on cigarette regulation as the US Food and Drugs Administration highlighted research that discovered that cutting nicotine by as much as 96% would improve public health. Subsequently, US regulators are set to focus on e-cigarettes which has sent the traditional tobacco giants sliding.

BAT is a share with an excellent long-term track record but it has come under pressure this year and hit a 4-year low last week. But overall the group stated that it continues to perform well and is still confident to achieve good adjusted revenue growth mainly as a result of its Strategic Brand Portfolio.

As Western governments keep the pressure up on tobacco companies, investor focus will increasingly be on its new products, a number of which are set to be launched in the coming months. The group generates significant steady cash-flow which helps with dividend payments; the quarterly payments are appealing for income-seekers but the long-term plan by the US authorities to reduce nicotine addiction presents a challenge so the shares are recommended at no more than a ‘hold’.


All information given including prices, yields and our opinion is correct at the time of publication. Our opinions on investments can change at any time and for our latest view please go to www.share.com. To understand how our Investment research team arrive at their views please read our Investment Research Policy.

Graham Spooner portrait photo
Graham Spooner

Investment Research Analyst

Graham started out as a fully authorised dealer on the Stock Exchange trading floor and for various banks, before becoming an FSA-approved investment adviser. Now a respected voice in the media, Graham’s share tips and comments on the markets are frequently sought by the national press.