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Why Tobacco Stocks Registered Impressive Gains in Q1

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Sin stocks’ performances

Sin stocks marked healthy growth in the first quarter. Molson Coors (TAP) and Brown-Forman (BF.B) stocks rose 6.2% and 10.9%, respectively, in the period. Meanwhile, Philip Morris (PM) and Altria (MO) stocks outperformed their peers as well as the broader markets and registered gains of 32.4% and 16.3%, respectively, in the period.

The shares of these tobacco companies took a hit in 2018, reflecting lower cigarette shipment volumes and anti-tobacco regulations. However, an improved earnings outlook and optimism around its new generation of products drove Phillip Morris’s stock price up in the first quarter. The company’s next generation of IQOS devices saw a better consumer response. Meanwhile, Altria stock gained from its investment in Juul Labs and Cronos Group (CRON).

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Analysts’ recommendations

Among the 20 analysts covering Philip Morris stock, 11 have given it “buy” recommendations, six have given it “holds,” and three have given it “sells.” Analysts have a target price of $90.59 per share on PM, implying a potential upside of 2.7% based on its closing price of $88.20 on April 1.

Meanwhile, among the 17 analysts covering Altria stock, eight have given it “buys,” six have given it “holds,” and three have given it “sells.” Analysts have given the stock a target price of $58.2, implying a potential upside of a mere ~1%.

The recent uptrend in its stock and the expected decline in cigarette shipment volumes could limit Altria’s upside.

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