Morgan Stanley and Jefferies Split on British American Tobacco (BTI) Outlook

Core Viewpoint - British American Tobacco (BTI) is experiencing a divergence in analyst outlook, with Morgan Stanley maintaining a cautious stance while Jefferies expresses strong confidence in the company's growth potential, particularly in smoke-free products [2][3]. Analyst Ratings and Price Targets - Morgan Stanley analyst Rashad Kawan raised the price target for BTI to 3,050 GBp from 3,000 GBp but retained an Underweight rating on the shares [2]. - Jefferies has named BTI as its top pick in the global tobacco sector, citing a sustainable shift towards a smoke-free product portfolio that is not fully reflected in the current share price [3]. Investment Case Factors - Jefferies analyst Andrei Andon-Ionita highlighted several positive factors for BTI, including market share gains in the US modern oral segment, early signs of volume and pricing improvements, and a solid outlook for combustibles through 2026 [4]. - The company's strong balance sheet is expected to allow for continued and meaningful cash returns to shareholders [4]. Growth in Modern Oral Products - Jefferies is more optimistic than the broader Wall Street consensus regarding BTI's growth in modern oral products, particularly in the US, where Velo Plus has seen over 300% growth in both volume and value [5]. - The resilience of the combustibles business is noted, as it continues to generate robust cash flow and margin expansion despite ongoing volume declines [5].