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British American Tobacco PLC

BAT shares rally, lifted by Piper Jaffray rating upgrade to 'overweight' from ‘neutral’

The US broker maintained its 3,000p target on BAT, with the shares currently trading at 2,4870, up 4.7% on Monday’s close, and said valuation appeared "attractive" at current levels

Menthol cigarettes
Piper Jaffray's analysts said: “While BAT has greater menthol exposure than its peers, risk from a potential ban already appears priced in"

British American Tobacco PLC (LON:BATS) saw its shares rally on Tuesday following recent falls lifted by an upgrade in rating from Piper Jaffray to 'overweight' from ‘neutral’.

The US broker maintained its 3,000p target on the FTSE 100-listed firm, with the shares currently trading at 2,487, up 4.7% on Monday’s close, and said valuation appeared "attractive" at current levels.

READ: British American Tobacco maintains annual earnings guidance

Piper Jaffray trimmed its estimates for the tobacco group on currency factors and to reflect more conservative US assumptions due to risks associated with the Food and Drug Administration’s ban on menthol cigarettes.

However, its analysts said: “While BAT has greater menthol exposure than its peers, risk from a potential ban already appears priced in."

They said they do not expect any operational impact on BAT "for years and years", as the rule-making process itself is lengthy and likely to be followed by "5-10 or more" years of legal challenges.

The analysts also noted that some BAT investors have raised worries at the potential risks to dividend growth, but they do not see it as an issue, noting that BAT's cash flows appeared to be at no risk in any way that would impact its payout.

Quick facts: British American Tobacco PLC

Price: £30.25

Market: LSE
Market Cap: £69.38 billion
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