And the bad news for tobacco companies continues! By now, most people are aware of the FDA’s latest proposition: lower the level of nicotine in cigarettes. As a result, Altria Group (NYSE:$MO) shares have continued to drop in pre-market trade on Monday, July 31. Right now, RBC Capital has warned investors not to purchase the dip.
After falling 9.5% on Friday – the biggest one-day tumble since 2008 – Altria stock dropped 1.8% ahead of the open. Nik Modi, an analyst for RBC Capital, upgraded Altria to sector ‘perform’ from an underperforming rating. However, Modi maintained a stock price target of $62, which was 7.4% below Friday’s closing price. According to the analyst, large regulatory price shocks have helped to create buying opportunities in the past, but he believes this time around will be different.
One of his concerns is that Altria is not a buyout candidate. Additionally, Modi worries that fundamentals will remain under pressure after dismal second-quarter results, and “we are not going to make a leap of faith” on the launch of Altria’s new smokeless cigarette, seeing as there is limited visibility on regulatory problems.
Year to date through Friday, Altria stock has lost 1.0%.
Featured Image: twitter
