British American Tobacco (BTI) share price forecast: Going up?
The British American Tobacco stock value has been increasing since December last year after democrats in the US Senate dropped a proposal to introduce a tax on vaping products.
An exclusive report from the Wall Street Journal stated that the proposal was removed from the healthcare, education and climate change bill at the end of the year. The levy would have been similar to the $1.01 tax imposed on the sale of each pack of cigarettes in the US and may have hurt demand for vaping products.
Market participants reacted positively to the news. On 10 December, the day after the Wall Street Journal report came out, the BTI stock price rose by 3% and has since gained 30.5%. The substantial increase reflects the importance of the US market to the company – it is its largest in terms of revenue.
What can we expect from the tobacco stock in light of this development? Can the uptrend continue for the rest of 2022? Here we will assess the latest British American Tobacco news along with its price action and fundamentals to outline how its future may unfold.
British American Tobacco stock analysis: Technical view and price drivers
BTI stock has seen a 24.3% year-to-date increase since the start of the year. On 11 February, the company announced it would be undertaking a £2bn ($2.7bn) share buyback programme. The scheme started on 14 February and will continue until the end of the year.
Shares surged by almost 4% on the day the report was published and continued to climb until reaching their highest level since late October 2018.
Together with the positive legislative news from the US, the announcement of this substantial buyback programme has been the driver of the BTI stock’s positive performance lately.
The chart above shows that the stock is trading within an ascending price channel while positive momentum has accelerated to multi-year highs.
At the time of writing, on 22 February, the relative strength index (RSI) is at 76, pushing it into overbought territory, while the moving average convergence divergence (MACD) is at its highest level for at least three years.
That said, a slight bearish divergence has popped up in the RSI while the MACD hasn’t topped its current high despite the stock price continuing to climb.
British American Tobacco fundamental analysis: Latest earnings
On 11 February, British American Tobacco published its preliminary results for the full 2021 fiscal year.
Revenues for 12 months totalled £25.68bn, representing a 6.9% increase on a constant-currency basis compared to the previous year.
Sales from new categories (primarily e-cigarettes and vaping products) rose by almost 51% on a constant-FX basis to £2.05bn, which accounted for 7.9% of the firm’s total top-line results.
Operating profits ended the period 5.2% higher at £11.15bn, while operating margins declined 70 basis points compared to the previous year after accounting for the impact of foreign exchange rates.
The company produced operating cash flows of £9.71bn and free cash flows after dividends of £2.54bn, meaning that its capacity to cover its large distributions remains strong.
British American Tobacco had £39.65 in borrowings at the end of the period, and dividends per share stood at 217.8p. According to the British American Tobacco stock dividend history, the company has increased its distributions once in the past two years.
BTI stock predictions: Analyst ratings
According to the company’s website, one American Depositary Share (ADS) – BTI stock – represents one ordinary share of British American Tobacco, whose primary listing is on the London Stock Exchange under the ticker symbol BATS.
Are British American Tobacco shares a ‘buy’, ‘sell’ or ‘hold’? Data compiled by MarketBeat on 22 February showed a bullish consensus recommendation for the BATS stock. A total of seven out of nine analysts covering the stock rated it as a ‘buy’ while the remaining two gave it a ‘hold’.
The 12-month average BATS stock price target stood at £37.01. The lowest estimate was set at £32.10, while the highest was £42.
In February, following the firm’s latest financial report, JP Morgan Chase and Barclays increased their price targets for the stock to £35.50 and £42 per share, respectively.
British American Tobacco stock forecast: Analyst sentiment
Analysts from Hargreaves Lansdown stated the following in regards to the company’s outlook: “A dominant market position and an addictive product has repeatedly seen the group hike prices while moving customers onto premium products. With relatively low capital requirements, the group's delivered prodigious amounts of cash despite falling volumes.
“A lot of that cash is currently tied up in stabilising a balance sheet that's carrying considerably more debt than we would like, but it still leaves a sizeable surplus that can be returned to shareholders through dividends (which have grown every year since 1999 to date) – but are never guaranteed”.
Speaking of the company’s prospects, Mikhail Karkhalev, an analyst at Capital.com, said:
“British American Tobacco is one of the oldest and most resilient companies on the market but has seen some stagnation in recent years, with revenue and net profit not changing significantly since 2018.
“However, at the end of 2021, BAT reported preliminary financial results in which it reported a 6.9% increase in adjusted annual revenue. The company attributed the increase to a surge in demand for e-cigarettes during the pandemic, with sales soaring 51% to £2.05bn. In addition, the company also announced a 1% increase in dividends.
British American Tobacco (BTI) share price forecast: Targets for 2022, 2025 and 2027
Meanwhile, algorithm-based forecasting services shared mixed BTI stock price targets for the years ahead.
On 22 February, Wallet Investor was holding a bullish outlook for British American Tobacco stock in the short term based on a set of technical indicators.
The longer-term British American Tobacco share forecast was rather conservative, indicating the stock could remain stuck, with an average price of $45.56 by the end of 2022, that’s 2% lower than its closing price of $46.50 on 21 February. It suggested the BTI stock would move up slightly over the next few years, however, reaching $46.64 by the end of 2025.
Although WalletInvestor didn’t provide price targets for 2030, its five-year forecast estimated the BTI stock could hit $48.27 by the end of February 2027.
Gov Capital was more bullish in its British American Tobacco stock forecast when we reviewed it on 22 February. The service expected the BTI stock to move up to $49.33 per share by the end of 2022, then rise to $85.99 by the end of 2023 and to $204.04 by the end of 2025. Its five-year BTI forecast estimated the stock could hit $311.12 by the end of February 2027.
These forecasts have been drafted by analysing the historical British American Tobacco stock market price. They should not be considered a recommendation to buy or sell the stock. Many variables could weigh on the company’s short-term and long-term performance, and actual results could deviate significantly from these predictions.
It is essential to do your own research. Your decision to trade depends on your attitude to risk, your expertise in the market, the spread of your investment portfolio and how comfortable you feel about losing money. You should never invest money that you cannot afford to lose.
FAQs
Is British American Tobacco stock a buy?
British American Tobacco is considered a dividend stock because of its elevated dividend yield. Last year, the company managed to produce after-dividend positive free cash flows meaning that the business could fully cover its distributions by using the proceeds from its core operations.
Still, whether BTI stock is a suitable investment for you depends on your opinion of the company and your investment objectives. Never invest money you cannot afford to lose. And remember that past performance is no guarantee of future success.
Will British American Tobacco stock go up or down?
According to the algorithm-based forecasts from Wallet Investor and Gov Capital on 22 February, the price of BTI stock could remain relatively range-bound in the next five years or rise based on an analysis of its historical trend.
Why has the British American Tobacco stock price been going up?
The price of BTI stock has been rising due to positive regulatory news in the US and the announcement of a sizable share buyback programme that should be fully executed by the end of 2022.
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