“This could possibly sound counter intuitive, but vaping bans could essentially enhance a organization like Universal Corp. UVV, -.05% In truth, it is one particular of my favourite dividend stocks in 2019.”
Following the most recent accusations faced by the vaping sector, that e-cigs are to blame for the lung illness outbreak across various US states, e-cigarette bans have been spreading like wildfire. The States of Washington, New York, Michigan, Rhode Island, Montana and Oregon, have announced that they are taking into consideration or implementing short-term bans on flavoured vaping solutions, even though Massachusetts Governor Charlie Baker, desires to set in location a 4 month ban on the sales of all vaping devices.
In addition, Utah has passed emergency regulations limiting exactly where e-cigarettes can be sold, and California’s governor has issued an executive order to raise public awareness and create warning labels. Most importantly final month, the Trump administration also announced that it would be banning flavours across the States, but no additional facts to this impact have been released just as however.
Altria anticipated to take a hit due to investment in Juul
Considering that Altria owns a 35% stake in Juul, Citigroup is expecting a 7% decline in cigarette volumes, and an 11% decline in shipments.
In response to these actions, shares of Altria Group Inc. MO, +.31% rose ahead of paring these gains, following Citigroup upgraded the stock to neutral from sell saying that it expects cigarettes to advantage from the events surrounding e-cigarettes.
“The stock is beneath our target and we assume it no longer appears high priced relative to overseas peers,” analysts wrote in a note to customers. “Unfortunately we count on the quick-term newsflow (on FDA regulation and earnings) to be tricky.”
Citigroup added that it is expecting the FDA flavour ban to be harsh and contain a ban on mint and menthol flavours, which would pose a important challenge to Juul. Considering that Altria owns a 35% stake in Juul, Citigroup is expecting a 7% decline in cigarette volumes, and an 11% decline in shipments. Altria stock has currently fallen 11% in 2019.
Tobacco providers advantage from e-cig bans
Earlier this year, following the ban announced in San Francisco, in an report on MarketWatch, senior earnings analyst at Mauldin Economics Robert Ross, had rightly predicted that the San Francisco ban was probably to be the initially of quite a few. “But other cities are currently taking into consideration related laws. So this appears like the get started of a larger trend that could weigh heavily on specific tobacco providers.”
He had added that these bans are probably to advantage tobacco providers. “Despite this threat, tobacco providers are nevertheless a fantastic, recession-proof investment. And there’s one particular tobacco stock that will advantage from the crackdown on e-cigs large time. This could possibly sound counter intuitive, but vaping bans could essentially enhance a organization like Universal Corp. UVV, -.05% In truth, it is one particular of my favourite dividend stocks in 2019,” stated Ross.
“… e-cigarette regulations can not hurt the organization. (Perversely adequate, they could possibly even support, as smokers return to regular cigarettes if and when e-cigarettes grow to be tougher to invest in),” he added at the time.
Study Additional: Market place Watch
Tobacco Stocks Jump Following FDA Warning to E-Cig Organizations