2/17/2021 As Juul Vaporizes, Altria’s Stock Takes a Major Hit | Barron's

PREVIEW

As Juul Vaporizes, Altria’s Stock Takes a

Major Hit
By Evie Liu Feb. 28, 2020 7:26 pm ET

Artist: Elias Stein IG: elias_stein

Illustration by Elias Stein

Altria’s big bet on vaping is shrinking fast. The tobacco giant best known for
Marlboro cigarettes invested $12.8 billion for a 35% stake in e-cigarette maker Juul
Labs in 2018. A year later, the investment was a third of its original value, after Altria
wrote it down by $4.5 billion in October and $4.1 billion in January.

The reason: mounting lawsuits against Juul over vaping’s health risks, especially
among teens. Earlier this year, the Trump administration banned certain e-
cigarettes with fruit and candy flavors. To continue selling in the U.S., Juul
reportedly plans to pitch a device with age-verification capability—along with
retooled marketing—to the Food and Drug Administration.

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2/17/2021 As Juul Vaporizes, Altria’s Stock Takes a Major Hit | Barron's

Juul’s woes have hurt Altria’s results and share price. For fiscal 2019, Altria posted
its first loss in decades, and its stock has declined 23% over the past 12 months. It
didn’t help that U.S. lawmakers raised the legal age to purchase tobacco products
from 18 to 21. Altria forecasts that its domestic sales—largely flat over the past few
years—will fall by 4% to 6% in 2020. The company also backed out of a merger with
Philip Morris International last year that investors disliked.

Sluggish Growth
Altria's annual sales growth has slowed in the past few years in a mature U.S. tobacco
market.
Revenues net of excise taxes
$25.billion

20

15

10

0
2008 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’17 ’18 ’19
Source: FactSet

Juul isn’t Altria’s only bet on diversification in a mature U.S. tobacco market. The
company also has invested in beer giant Anheuser-Busch InBev, Canadian pot
company Cronos Group, and Switzerland’s Burger Sohne, which sells oral nicotine
pouches. At nine times forward earnings, Altria shares seem cheap. Analysts are
looking for a 34% price rebound over the next 12 months. After all, there’s only so
far Juul can fall.

Next Week

Monday 3/2
Dentsply Sirona and Evergy report quarterly results.

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