Market Observation 2022: Philip Morris

The tobacco giant Philip Morris International Inc (PMI) saw a bumpy year in its stock as it stays fixed at around $100 year-to-date from $94.89 on Jan. 3 to 100.92 on Dec.21. PM has been trading neutral recently. The stock is trading down -1.67% this week following yesterday's decline. PM has an average analyst ranking of Strong Buy with an average price target of $103.625.

Similar to most of the common stocks, PM price fluctuates on a 60-day basis. This year saw it soar to as high as 111.61 and bottomed as low as 83.01.

Sustainability has become the buzzword for the world's tobacco giants. PMI announced its ambition to go carbon neutral by 2025. As part of the effort, it built eight new carbon-neutral production centers, and constructed a green energy base in Indonesia this year to supply energy sustainably in its effort towards production carbon-neutral. Meanwhile, PMI is promoting Heat not Burn (HnB) products all over the world. According to a report of Bisnis Indonesia, PMI's subsidiary HM Sampoerna will shell out $166 million for a cutting-edge HEETS production factory for PMI's IQOS system in Karawang, Jawa Barat, Indonesia in the fourth quarter of 2022.  This November, PMI finally acquired Swedish Match—the world's largest tobacco company that doesn't sell cigarettes—after six months. Swedish Match's flagship products, for example, snus and nicotine pouches, will put PMI in great stead for its smoke-free strategy and tobacco harm reduction.

While it may take time for the carbon-neutral production centers to see return, tobacco harm reduction (THR) and next-generation products (NGP) are no longer new ideas. They have become a ready source of profit. In its 2022 third-quarter results released on October 20, net revenues from smoke-free products accounted for 30.1% of PMI's total; market share for heated tobacco units (HTUs) in IQOS markets went up by 1.3 points to 7.7%. IQOS users worldwide at quarter-end totaled 16.4 million. However, PMI is currently battling against BAT on heated tobacco product patents. The latest news by Law360 show that The Court of Appeal on Friday upheld the High Court's decision to invalidate the Philip Morris Products SA patent for its induction method for heating up tobacco because of obviousness. 

Still, the world's largest tobacco company still has high expectations. In the list of stock analysis by InvestorObservation, PM ranked 1st among all tobacco companies, and out-performing 67% of all listed companies.