Tobacco Stocks: Why BTI and MO Stocks Are Burning Up Today

Today, tobacco stocks are in focus for investors. Indeed, the regulatory environment around tobacco products has been heating up of late. For Altria (NYSE:MO) and British American Tobacco (NYSE:BTI), this has translated into some rather large declines today.

pile of cigarettes
Source: Shutterstock

Both stocks are down between 4% and 7% at the time of writing. For investors in tobacco stocks, this is a rather large daily move.

Like other sectors that have been hit hard by regulatory concerns, tobacco stocks appear to be on the radar of Democratic lawmakers. President Joe Biden announced earlier this year he’s looking at what would amount to an effective nicotine ban. For cigarette makers with significant exposure to the U.S. market, namely Altria and British American Tobacco, this is a big headwind.

Today, there’s another catalyst taking MO stock and BTI stock lower. Let’s dive into what’s driving this sector lower today.

Ban on Iqos Device Hitting Tobacco Stocks Today

Today, investors in Altria and British American Tobacco are licking their wounds following an announced ban on the importation and sale of the Iqos tobacco device. This ban applies to the U.S. market only and is one that cigarette makers are looking at disputing.

The Iqos device was launched in the U.S. two years ago. However, this product has been in emerging markets for some time, suggesting the U.S. ban could have an impact on how other regulatory bodies view this device. Rather than burning tobacco, as with traditional cigarettes, the Iqos device heats the tobacco to allow for ingestion without many of the harmful side effects. Accordingly, this device has been viewed as a stepping stone away from cigarettes, a positive for those looking for a transition away from smoking.

While appeals remain pending, this ban is likely to hit the bottom lines of these key tobacco stocks. Accordingly, investors are increasingly pricing in the risk associated with the regulatory overhang on this sector today. Investors appear cautious with respect to whether this ban will be the first of many or a one-time deal. For now, it appears many equity holders of tobacco stocks are erring on the side of caution.

On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

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