Key Points
- BofA upgraded Imperial Brands to “buy” from “neutral” and kept its 3,200p price target.
- The bank said investors overreacted to a sharp downturn in Imperial’s Australian business.
- Imperial shares have fallen about 13% since its April 14, 2026 trading update.
- BofA estimated that Australian revenue fell 45% to 65% in the first half, but Australia now represents only about 1% of tobacco and NGP sales.
- BofA expects strong cash generation to support buybacks and about 10% compound annual EPS growth through 2030.
2Firsts
July 16, 2026
According to a report carried by Yahoo Finance, Bank of America upgraded Imperial Brands PLC (LSE: IMB) to “buy” from “neutral,” arguing that the market has overreacted to the tobacco group’s Australian business downturn. BofA maintained its 3,200p price target, implying roughly 20% upside from current levels.
BofA Says Australia Concerns Have Been Overpriced
AskTraders reported that BofA sees Imperial Brands’ share-price decline as an attractive entry point. The stock has fallen about 13% since a disappointing trading update on April 14, 2026, leaving it trading at about 7.6 times forward earnings, down from roughly 9 times before the announcement.
BofA said Imperial’s first-half results were affected by temporary one-off factors rather than structural weakness in the core business. Australia was the primary drag, with revenue estimated to have fallen 45% to 65% in the first half and reducing group operating profit by about two to three percentage points.
However, BofA noted that Australia now accounts for only about 1% of Imperial’s tobacco and next-generation product sales, down from 3% a year earlier. That sharply reduces the market’s ability to derail future group performance, according to the bank.
Price Target Held at 3,200p as Shares Rise
Alliance News’ London broker-ratings summary also showed that BofA raised Imperial Brands to “buy” with a 3,200p price target.
AskTraders reported that Imperial shares rose about 2.4% to 2,736p following the upgrade. Yahoo Finance said the stock rose 1.3% to 2,706p. The figures reflect different points during the trading session, but both indicate that the shares moved higher after the upgrade.
BofA Cites Cash Flow, Buybacks and EPS Growth
BofA expects Imperial to meet its fiscal-year guidance for 3% to 5% operating profit growth, forecasting 3.2%. Looking into 2027, the bank sees upside versus consensus, supported partly by cost savings from a Taiwanese factory disposal and a German plant closure.
The bank also said growth in Africa, the Middle East and Central and Eastern Europe, up about 13% excluding Australia, is helping offset near-term competitive pressure in the United States.
On capital returns, BofA highlighted Imperial’s strong cash generation as a support for substantial buybacks. It projects about 10% compound annual EPS growth through 2030 and a dividend yield of roughly 6.5%.
Imperial Previously Reiterated Full-Year Guidance
Imperial Brands said in an April 14, 2026 trading update that it was reiterating full-year guidance and expected low-single-digit growth in tobacco and next-generation product net revenue in the first half of fiscal 2026. It also said group adjusted operating profit would be slightly higher than in the first half of fiscal 2025, with growth accelerating in the second half.
The company said it was on track to deliver at least high-single-digit EPS growth and at least £2.2 billion of free cash flow for the full year. Imperial said tobacco pricing and next-generation product innovation were expected to drive low-single-digit growth in first-half tobacco and NGP net revenue.
On May 12, 2026, Imperial announced its half-year results, saying it had delivered continued revenue growth, strong cash generation, a dividend increase and strategic progress. The company said that while Middle East tensions had created a more uncertain macroeconomic environment, it remained confident of delivering a step-up in adjusted operating profit growth in the second half, in line with full-year guidance.
Australia’s Illicit Tobacco Market Remains a Pressure Point
The rating upgrade comes after market concerns over Imperial’s Australian business. Australia’s expanding illicit tobacco and illicit vaping market has created pressure on legal tobacco sales and pricing.
Australian media recently reported that illicit tobacco sellers are shifting online as enforcement and violence around physical retail stores intensify. According to the same reporting, Australian Bureau of Statistics data showed that 80% of tobacco and nicotine products consumed in 2025 came from illegal sources, while nicotine consumption has risen nearly 40% since 2017.
For Imperial Brands, BofA’s central view is that the Australian downturn is real but now too small within the group’s revenue mix to justify the scale of the market’s reaction. The upgrade highlights how investors are weighing three issues across major tobacco companies: resilience in core profit, cash generation and buybacks, and whether next-generation products can support longer-term growth.
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Cover Image source: Yahoo Finance
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