Investors of British American Tobacco PLC (LSE:BATS) (BAT) shouldn’t be overly concerned about some of its menthol products being denied regulatory approval, says Jefferies Group (NYSE:JEF).
The US bank added that the changes in the vape industry should also allow the tobacco company to improve its market share.
Jefferies said: “Even if {BAT's] Alto menthol is denied, it is very likely this will be challenged legally.
"We think there’s a good chance of BAT being successful, but worst case, it means a stay is granted until the court case is resolved, which could take up to two years.”
Additionally, flavoured tobacco and menthol products are likely to remain on the market based on the FDA’s signalling, the New York bank stated.
Vaping trends are also improving with many disposable products losing market share due to missing regulatory deadlines last year.
US-tracked retail and shipping figures indicated that the popularity of disposables is faltering after a decline in the second half of 2022.
In the UK, major supermarkets have begun removing the one-use ‘Elf bars’ from shelves as of last month.
This clears the path for BAT’s refillable vape products to gain a larger portion of the market, Jefferies believes.
Altria has also joined the vape market with its NJOY product, and the investment bank believes the Virginia-based company will lobby for the enforcement and removal of illegal products nationwide.
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