Cowen downgraded tobacco giant Altria to market perform from outperform on Monday, seeing accelerating declines in an already deteriorating US cigarette market.
Altria's cigarette volumes will decline at a 7.3 percent annual rate over the next five years, compared to the average decline of 3.1 percent over the last five years, according to Cowen. Altria in December invested in e-cigarette maker Juul to combat the retreat in cigarette volumes, taking a 35 percent stake to gain exposure to the increasingly disruptive e-cigarette space. However, the move will not be enough to offset the decline, Cowen said.
"Although the Juul investment was likely the right move, Altria is incentivized to accelerate cigarette industry volume declines," Cowen's Vivien Azer said in a note on Monday titled "Tumultuous times in tobacco for Altria." Cowen decreased its net sales growth for 2019 to 2023 to 60 bps to 1.9 percent to reflect accelerating volume declines.
"Juul is probably a good deal for Altria that suffers from poor timing, and would be a key factor in our getting more constructive on the name," Azer added.
Cowen also lowered it 12- month price target for Altria to $53 from $74. Shares of Altria have fallen 14 percent in the past six months.
Altria's stock fell 1 percent to 49.8 in pre-market trading on Monday.