Altria’s Bet on E-Cigarettes Is Burning Its Stock

An investment in electronic cigarettes hasn’t helped shares of Altria Group this year.


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Sept. 19, 2019 11:39 am ET

America’s biggest tobacco company is being burned by its investment in e-cigarettes.

Altria Group

MO -0.66%

shares have tumbled 17% in 2019 to a five-year low, with selling accelerating in recent weeks after health officials and politicians stepped up scrutiny of e-cigarette device Juul.

That is even as the broader market has rallied, with the S&P 500 up 20% and within striking distance of a record. The slide shows how Altria’s $12.8 billion investment in Juul Labs Inc.—which the company touted as a way for it to tap into a rapidly growing market while offsetting the broader decline in traditional smokers—hasn’t worked out exactly as it had hoped.

Juul has been hit by a number of setbacks this year that have put its future in doubt. President


has said he plans to ban most vaping flavors because of growing health concerns; the Federal Trade Commission is investigating whether Juul used influencers with large social-media followings to appeal to minors; and sales of the company’s vaporizers were abruptly halted in China in September. Worries about the firm’s potential merger with rival

Philip Morris International

have also hurt the stock. Analysts have raised questions since the two companies confirmed in late August that they were discussing potentially reuniting, with



Adam Spielman

saying in a note earlier this month that a deal might only increase the combined firm’s reliance on traditional nicotine products at a time when cigarette use is declining. One silver lining: after taking a hit, Altria’s stock looks relatively cheap. It is trading at around 9.2 times its expected earnings over the next 12 months, well below its five-year average of 17 times. And shareholders can expect to reap relatively hefty dividends, too: Altria offers a dividend yield of around 8.2%, according to FactSet, around four times that of the S&P 500. Not that it is helping draw investors back in yet. The regulatory outlook for vaping products looks riskier than initially expected, said Piper Jaffray analyst

Michael Lavery

in a note earlier in September. He’s lowered his rating for the stock to “neutral” from “overweight.” Write to Akane Otani at

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