British American Tobacco fell as much as 3% as the shares went ex-dividend and a new UK tax on vapes came into force.
The duty applies to all vaping liquids made in or imported into the UK from 1 October, whether or not they contain nicotine.
It is charged at £2.20 per 10ml of e-liquid, although many shoppers will not see prices rise straight away because retailers have six months to sell old stock at pre-duty prices.
Duty on cigarettes and rolling tobacco also rose on Thursday, by £2.20 per 100 cigarettes or 50g of tobacco.
Brokers see a buying opportunity
Two brokers used the sell-off to repeat their buy ratings after BAT's capital markets day, a two-day investor event in Winston-Salem, North Carolina.
Citi said recent weakness in the shares looked overdone and named BAT its top pick into the end of 2026, with a price target of £52.
Deutsche Bank set a target of 5,100p, against the current price of 4,000p (down 1.7%).
No surprises, more confidence
Citi said the event brought no major strategic announcements but should leave investors more confident that management can hit its medium-term growth targets.
Under BAT's Horizon 2030 plan, nicotine pouches, which the company calls Modern Oral, will be the main growth engine.
Traditional cigarettes will remain the cash generator that funds investment, dividends and share buybacks.
BAT has also merged its vapes and heated tobacco products into a single business it calls Inhalation.
Citi said the company saw big potential in the US vape market as enforcement against illegal products improves.
Heated tobacco, by contrast, will be run with tighter financial discipline, with the focus on cutting losses from 2027.
Citi said these choices made it more confident that BAT's newer products could deliver organic sales growth in the mid-teens and a contribution margin above 30% by 2030.
Seven levers
Deutsche Bank analyst Damian McNeela said the event reinforced his view that a genuine transformation was under way at BAT.
He said management had shown both the depth of its leadership team and clear strategic priorities.
BAT set out seven levers for growth, led by the US market and nicotine pouches.
The others include winning in cigarettes, pushing premium vapes and heated products, and investing in businesses beyond nicotine.
The company also wants wider acceptance of tobacco harm reduction, the idea that smokers should be encouraged to switch to less harmful products.
