Sell-side Consensus: BAT 

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Below is a summary of BAT price targets of major financial services firms which updated or reiterated their ratings since June 2023. Following BAT’s Interim Business Update (Dec 6, 2023), 8 firms (out of 11 covered) decreased their price targets: by £4.6 (14.5%) on average. However, the period following the FY23 Results announcement (Feb 8, 2024) has been largely silent so far with only four minor adjustments (ranging from -£1.5 cut to +£0.5 increase).

The average sell-side target for BAT is now down to £29.5. Despite the wide £23-£40 range, a price target cluster is formed around £29 if the outliers are excluded. Based on BAT’s last closing price of £23.7, the implied upside is +24% – which is similar to the upside promised at any point over the past 5 years except for two distinct/short-lived periods of share price surge. See the “Point of Caution” below.

Feb 19, 2024Jefferies£33£32Buy
Feb 14, 2024Morgan Stanley£29£28Buy1
Feb 12, 2024JP Morgan£27£25.5Neutral
Feb 12, 2024Goldman Sachs£27£27.5Neutral
Jan 23, 2024UBS£29 £24Neutral2
Jan 11, 2024Bank of America£29Buy
Dec 8, 2023RBC£35 £29 Neutral3
Dec 8, 2023TD Cowen£27.5£23Neutral3
Dec 7, 2023Barclays£32£26.5Buy1
Dec 7, 2023Deutsche Bank£40£40Buy
Sept 22, 2023Citigroup£30Buy
June 20, 2023Credit Suisse£39£39Buy1
Consensus£29.55N, 7B
(1) Over-weight/Out-perform (2) from Buy to Neutral (3) Sector/market-perform

Point of Caution

Sell-side work has a level of influence on investors despite the fact that

– the accuracy and knowledge attributed to the analysts tend to be over-stated

– analyst targets are frequently criticized to be reactive, rather than predictive (i.e. following the actual price progression rather than foreseeing it)

– there are serious studies claiming that companies with the most ambitious analyst targets consistently generate subpar returns

– many suspect analysts are influenced by inherent conflicts of interests and business relationships.

Nevertheless, sell-side is an integral part of the business-investing ecosystem and we cover their work for the sake of completeness. Moreover, we need to underline that following decades-long stability in operating and competitive environment, the Tobacco Industry is experiencing a perfect storm of multi-dimensional and concurrent transformation (driven by the replacement of traditional cigarettes by RRP/NGPs) – a phenomenon that makes it more difficult than ever for the sell-side analysts to grasp the business/market dynamics and establish fairly accurate financial models.

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