Despite the fall in Philip Morris International’s (PM) stock price, analysts have raised their next-12-month target price. On July 24, 2017, analysts expected Philip Morris’s stock price to touch $124.41 in the next 12 months, which represents a return potential of 4.6%. Before its 2Q17 earnings, analysts had forecasted a price target of $122.41.
The initiatives taken by the company’s management to expand the availability of IQOS to 30–35 markets by the end of 2017 increased its investment to raise the manufacturing capacity of HeatSticks. The greater conversion rate of customers to IQOS could have prompted analysts to raise the company’s price target for the next 12 months.
The target price and return potential of Philip Morris’s peers are as follows:
- Altria Group (MO): $74.23, with a return potential of ~2.2%
- Reynolds American (RAI): $62.95, with a fall of 3.7% from its current stock price
Of the 19 analysts that cover Philip Morris, 47.4% are recommending a “buy,” 47.4% are recommending a “hold,” and 5.3% are recommending a “sell.” After the announcement of its 2Q17 earnings, Cowen & Co. raised its 12-month target price for Philip Morris from $130.00 to $135.00 and maintained its “outperform” rating.
If a company’s current price is lower than the analysts’ 12-month target price, this price scenario does not mean an automatic “buy.” One has to carefully analyze various parameters discussed in this series before making any investment decisions.