JPMorgan Restarts Coverage Could Shift The Case For BAT Shares (LSE:BATS)

• JPMorgan recently resumed coverage of British American Tobacco, highlighting the group’s growing presence in US nicotine pouches and vaping after FDA marketing authorizations for several Velo products.
• The focus on US modern oral nicotine, where British American Tobacco reports meaningful revenue contribution and an expanding product range, directly links the news to the company’s push toward smokeless products as a larger share of the business.
• We now look at how British American Tobacco’s investment narrative could shift as US nicotine pouch momentum gains fresh validation.

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British American Tobacco Investment Narrative Recap

To back British American Tobacco, you need to believe the shift toward smokeless products can keep building while traditional cigarettes face pressure. The analyst consensus Narrative on Simply Wall St leans on smokeless already nearing 20% of revenue, and on profit forecasts growing 8.66% a year. The short term hinge is execution in New Categories and keeping that earnings trajectory intact.

The biggest swing factor right now is whether Modern Oral and vapour can scale profitably as combustible volumes come under tax and regulatory strain. The major risk is that regulatory changes or illicit trade erode pricing power faster than smokeless grows, which would challenge those margin and free cash flow ambitions.

The most relevant operational milestone here is the FDA marketing authorizations for several Velo nicotine pouch products in the US. Those approvals give British American Tobacco more room to broaden its nicotine pouch presence in a market where Modern Oral is already cited as a meaningful revenue contributor.

This matters for catalysts because smokeless categories are expected by analysts to support future revenue mix and margin improvement, helped by Modern Oral gross profit per unit being referenced as about four times combustibles. Successful rollout and retention of FDA cleared products would feed directly into that thesis, while setbacks or tighter US rules would lean the other way.

British American Tobacco's narrative projects £28.6b revenue and £8.7b earnings by 2029. This is based on an assumption of 3.5% yearly revenue growth and an earnings increase of about £2.4b from £6.3b today.

Uncover why British American Tobacco's fair value indicates an 11% potential upside to its current price before that discount starts to close.

Exploring Other Perspectives

One optimistic twist in the alternate British American Tobacco narrative is how quickly U.S. smokeless can reshape earnings. The most bullish analysts were already pencilling in revenue of £30.0b and earnings of £9.3b by 2029 before this FDA news. You can treat that as a ceiling and explore how views might shift from here.

Explore 5 other British American Tobacco fair value estimates, including one that suggests as much as 83% upside from the current price.

Form Your Own Verdict

Don't just follow the ticker. Dig into the data and build a conviction that's truly your own.

• A great starting point for your British American Tobacco research is our analysis highlighting 3 key rewards and 2 important warning signs that could impact your investment decision.
• See our latest analysis for British American Tobacco. The report includes a comprehensive fundamental analysis summarized in a single visual, the Snowflake, making it easy to evaluate British American Tobacco's overall financial health at a glance.

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