Citigroup has upgraded its rating and upping its price target for Imperial Tobacco (LON:IMT) as it says a major price risk for the firm has disappeared.
The broker raises Imperial to buy/medium risk targeting a price of 2450 pence (previously the rating was hold/medium risk with a target price of 2260 pence).
The firm is currently trading at 2155 pence.
"Our new price target assumes that in 12 months Imperial’s forward multiple will have improved to 10.5 times as some of its changes become apparent," said analyst Adam Spielman, in a note.
British American Tobacco has upped prices in Spain (following Imperial and others) leading the broker to believe the price war there is now over and it comes after price skirmishes in Russia, Poland, the Netherlands and beyond.
"A major risk for Imperial has disappeared," he said.
Spielman adds that there is a good chance that the company will be able to improve its marketing, not least because the management wants to but other firms have shown it is possible to to improve in this area.
"At its investor day, Imperial showed that its new marketing and sales directors are talking the same language as companies like Diageo and BAT.
"While there is no proof this will translate into a better organic performance, we think there is a decent chance it will," said citi.