Sell-side Consensus: PMI

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Below is a summary of Philip Morris International (PMI) price targets of major financial services firms which updated or reiterated their ratings since January 2023.

2023 has been a year in which sell-side ran in circles. The year started with mega upgrades: such as, JP Morgan and Goldman Sachs going all the way from $95 to $116 and $120, respectively. After starting the year at $105, average analyst price target quickly increased in Q1 2023 and remained stable around $114 throughout Q2 and Q3 2023. A series of recent revisions brought the average target down to $103.5 (below the level at the beginning of 2023 and on the way to $100). Recall: our “PMI: Not All Roses” and “PMI – 2023 Investor Day: Preview” write-ups issued in September 2023 ahead of these price target cuts.

The unlikely winner of 2023 was the Societe Generale analyst who initiated PMI at $90 (Sell) on Jan 23, 2023 when the stock was trading above $100. On Jan 23, 2024 (precisely one year after Societe Generale), UBS downgraded PMI from Buy to Sell and reduced its price target from $105 to $86.5 (later reduced to $85 and marking the lowest sell-side price target).

Latest update: Jefferies reduced its PMI price target from $106 to $98 – just a few weeks after increasing it from $104 to $106.

Sell-side targets currently range from $85 to $117 – with four of them below $100. Based on the last closing price of $89.65, the average sell-side target for PMI implies +15% upside (- in the typical 10%-20% range for a company whose adjusted EPS is growing by “mid/high single-digit per annum”).

See our “Point of Caution” as you interpret the table below.

DateAnalystFromToRating
Apr 12, 2024Bank of America$109$108Buy
Feb 19, 2024Jefferies$106$98Buy
Feb 13, 2024Societe Generale$85.5$87.5Neutral1
Feb 12, 2024JP Morgan$115$110Buy2
Feb 9, 2024Morgan Stanley$113$104Buy2
Feb 9, 2024UBS$105$85Sell3
Nov 16, 2023Redburn$95Neutral
Oct 20, 2023Goldman Sachs$122$115Buy
Oct 20, 2023Stifel$114$108Buy
Sept 21, 2023Barclays$115$110Buy2
June 20, 2023Citigroup$109$117Buy4
Consensus$103.51S, 2N, 8B
(1) from Sell to Hold (2) Overweight (3) from Buy to Sell (4) from Neutral to Buy

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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