J.P. Morgan upgrades Philip Morris International (NYSE:PM) from neutral to overweight, making it the broker's top tobacco sector pick.
According to J.P. Morgan analyst Jared Dinges, Philip Morris' IQOS ILUMA product has increased heated tobacco share in initial launch markets, despite dealing with "severe" supply-chain issues.
Analyst expects this to ease in 2H23, allowing earnings growth to accelerate into 2024, and remain optimistic about the Smokefree business in the United States.
″“PMI offers for double-digit EPS CAGR with meaningful cash flow support (7.4% FCF yield 2024E), diversified risk (for a tobacco company), and who is just at the precipice of launching its highly successful Heated Tobacco brand, IQOS, in the largest nicotine profit pool in the world,” the analyst wrote.
J.P. Morgan hikes the price target on PM by 22% to $116.
Sector's top pick at J.P. Morgan, Imperial Brands (OTCQX:IMBBY) is also overweight, and British American Tobacco (BTI) is neutral.
Shares of Philip Morris (PM) up 1.70% in premarket hours on Thursday.