With the FDA increasingly asking e-cigarette manufacturers to justify their existence, tobacco giant Altria’s (MO) investment in Juul hangs in the balance. So should you buy MO stock now?
The FDA is trying to determine whether vaping products from hundreds of companies can still be sold, after asking manufacturers of those products to submit an application showing their products were healthier than traditional cigarettes.
The agency on Tuesday said that, under that process, a handful of Vuse e-cigarette products could be sold in the U.S. — its first such approval.
“The manufacturer’s data demonstrates its tobacco-flavored products could benefit addicted adult smokers who switch to these products . . . by reducing their exposure to harmful chemicals,” Mitch Zeller, director of the FDA’s center for tobacco products, said in a statement.
The agency denied applications for other Vuse products. But the approval could be good news for companies like Juul, whose own products await the FDA’s approval. That approval, in turn, could be good news for Altria, which in 2018 said it took a 35% stake in Juul
But Juul’s profit and sales expectations have faded. Competition and lawsuits alleging misleading health claims and efforts to target younger consumers have piled up.
Elsewhere, Altria has also invested in Canadian cannabis company Cronos Group (CRON). Cronos Group’s size in Canada remains small compared to other publicly traded marijuana stocks on U.S. exchanges. Analysts have waited for more to come from that investment.
The company has also faced questions about cigarette demand amid rising health consciousness, even though customers clung to their smoking habits last year amid the stress of the coronavirus pandemic.
MO Stock Fundamental Analysis
Analysts expect Altria’s 2021 earnings to grow 6% this year and 5% next year, according to FactSet.
Top stocks usually have solid underlying earnings growth. But overall, MO stock falls far short of the CAN SLIM benchmark for 25% growth in earnings and revenue.
Sales growth for Altria has been choppy, bouncing between single-digit percentage gains and declines over recent years.
MO Stock Technical Analysis
MO stock is a flat base with a 52.69 buy point.
MO stock is still not close to the highs it reached in mid-2017. The stock’s relative strength line has been falling for years. When a stock’s relative strength line goes lower, that means it’s falling behind overall compared to the S&P 500.
So Is Altria Stock A Buy?
MO stock is in a base. But it is not yet in a buy zone.
The bottom line: Altria is not a buy yet.
Moreover, MO stock has mediocre ratings. Earnings growth might tick higher this year. But revenue has bounced between anemic growth and modest declines.
IBD recommends investors focus on stocks that are closer to their highs and that have Composite Ratings of 90 or higher.
Follow Bill Peters on Twitter at @IBD_BPeters.
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