British American Tobacco snaps six-day losing streak

British American Tobacco (BTI) saw a 1.24% share price increase to $53 after a six-day decline, yet it remains down nearly 5% from earlier this month, although it has gained over 45% year-to-date.

Analyst upgrades and downgrades reflect a mixed sentiment, with Argus Research upgrading the stock to a Buy rating due to its successful shift towards smokeless alternatives, while other analysts suggest a Hold rating due to technical indicators and valuation concerns.

The stock is rated A+ for profitability but struggles with growth, and analysts highlight that while BTI appears undervalued with a strong dividend yield, it may experience a pullback to the $48-$49 range, presenting a potential buying opportunity.

Despite ranking as a Hold, Wall Street analysts largely support a Buy recommendation, indicating a general optimism about the company's future performance.

Recommendation Rating: Hold

British American Tobacco (NYSE: BTI) managed to break a six-day decline, concluding the trading session on Friday with a 1.24% increase, bringing its share price up to $53.

The stock entered a downward trend on September 18, dropping 1.98% to $54.92, and has since experienced an overall decline of nearly 5%. However, when viewed from a year-to-date perspective, BTI shares have risen over 45%, and they've gained approximately 39.5% over the past twelve months.

Earlier this month, Argus Research upgraded BTI from a Hold to a Buy rating. Analyst Christine Dooley pointed out that the company's shift towards smokeless alternatives in recent years is finally starting to pay off.

According to available quant ratings, BTI is currently suggested as a Hold, with a score of 3.29 out of 5. The stock boasts an A+ rating for profitability but struggles with a D rating for growth. In contrast, the majority of Wall Street analysts are advocating for a Buy rating.

On Thursday, three analysts revised their stance on BTI to Hold, while one opted to maintain a Buy recommendation. Mike Zaccardi expressed a Hold opinion, citing technical indicators that imply a potential pullback to the $48-$49 range, which he suggested could present a favorable buying opportunity.

Zaccardi stated, “A year ago, I rated British American Tobacco as a 'Buy.' Since then, shares have delivered a return of 46% (49% Year-to-Date). This has led me to downgrade my assessment to a 'Hold.' While the valuation is not excessively high, it has risen significantly above the long-term average. Current technical indicators hint at the possibility of a retreat from the year's mid-high point, yet I will highlight a favorable entry level at the end of this discussion.”

On another note, analyst Steven Fiorillo noted that BTI appears undervalued, currently trading at less than 12 times its anticipated 2025 earnings and offering a yield of 5.79%. He also emphasized the company’s robust free cash flow generation.