Summary
- Shares of Altria Group have declined due to fears about the company's investment in JUUL, declines in sales volumes of cigarettes, and an increased debt load.
- Market pessimism has grown excessive and we believe Altria Group is a buy at current levels.
- Management has done an excellent job of keeping revenues and profitability stable despite secular headwinds.
Introduction
Altria Group, Inc. (MO) is a Virginia-based conglomerate that is involved in the production and sale of tobacco-based products. It is the parent company of Philip Morris USA (which sells Marlboro, Virginia Slims, and other cigarettes), has a 10.5% interest in Anheuser-Busch InBev (BUD), and owns a 35% stake in Juul Labs.
Shares have come under fire lately due to concerns about declining cigarette sales, a federal crackdown on vaping products, and stagnant sales growth. We believe that the decline in share price has become excessive and are bullish on the company.
Financial Snapshot as of October 24, 2019 (in m USD)
| Share Price | 46.75 |
| Shares Outstanding | 1,878.0 |
| Market cap | 87,571.4 |
| Debt | 27,096.0 |
| Cash | 1,796.0 |
| Enterprise Value | 112,871.1 |
(Source: Yahoo Finance)
Reasons For Share Price Decline
Although shares have climbed 20% over the past few weeks, shares are still down by 25% over the past twelve-month period (a large move given how large the company itself is). There are a number of reasons for this drop, which we'll describe below.
