Philip Morris International Inc. (PM) Sees 50.6% Increase in Nicotine Pouch Sales Driven by ZYN
We recently published a list of 8 Best Inexpensive Stocks To Invest In Now. In this article, we are going to take a look at where Philip Morris International Inc. (NYSE:PM) stands against the other best inexpensive stocks to invest in now.
Are Experts Already Looking Into 2025?
The recent market surge has raised concerns about potential market overvaluation. While the market has experienced significant gains, there are growing concerns about the allocation of capital and the potential for inflationary pressures. The market has witnessed a significant upward trend following the Fed’s rate cut, with major indices reaching new all-time highs. This surge reflects a combination of factors, including increased investor confidence and optimism about the economic outlook.
Investors are advised to carefully consider their investment strategies amidst the current market dynamics. While small-cap stocks offer potential growth opportunities, it is crucial to evaluate the broader market trends and potential risks. By understanding the market dynamics, investors can navigate the current landscape and make informed decisions to achieve their financial goals.
On top of economic uncertainty, the upcoming elections also drive analysts to become overly cautious as the market becomes more volatile in the short term due to confused investor sentiments. Tom Lee, Fundstrat Global Advisors managing partner and head of research recently appeared on CNBC and recommended investing in small-cap stocks and equities over bonds, as they offer better growth potential, as long as the election uncertainty remains. We went over his opinion in greater detail in our article about the 10 Best Young Stocks To Buy Now, here’s an excerpt from it:
“….Tom Lee explained that the Fed’s actions have initiated an easing cycle, which historically tends to yield positive outcomes for the market 3-6 months down the line. However, he cautioned that stock performance in the immediate future remains uncertain due to ongoing repositioning ahead of the upcoming election in 40 days.
….He noted that many wealth managers and family offices are hesitant to commit capital until after Election Day, preferring to wait until that event is behind them. He expressed optimism about a potential surge in stock prices following the election, stating that November and December typically see strong rallies in election years, especially when markets have already gained more than 10% in the first half of the year.
….He highlighted an upcoming Core Personal Consumption Expenditures (PCE) report expected on Friday, which could confirm that inflation is no longer a pressing concern…Regarding a comment on recent target adjustments for the S&P 500, mentioning Brian Belski’s increase of his target to the highest on Wall Street, Lee acknowledged the potential upside in the next 3-6 months, expressing skepticism about setting aggressive targets like 6,000 for the S&P 500 at this time due to current valuations not being particularly low and having already experienced significant gains.”
As more and more analysts suggest space for further rate cuts, Vance Howard, CEO and Portfolio Manager at Howard Capital Management predicts a rate cut in early 2025 due to falling inflation and historical trends.
Appearing on CNBC on September 25, Vance Howard discussed the outlook for the market and the economy as we approach Q1 2025. He confidently stated that another significant rate cut is likely, driven by data indicating a need for it, particularly as inflation begins to decline. Howard pointed out that historically, after the first rate cut, markets tend to rise, with a perfect record of being higher 7 out of 7 times following such cuts. He also noted that if the S&P 500 has already gained 10% in the first half of the year, there is an 83% chance of continued upward movement in the second half. Therefore, he advised investors to remain optimistic and not be overly distracted by current market noise.
When asked about strategies for setting up portfolios in light of potential market volatility, Howard emphasized the importance of focusing on certain sectors. He highlighted utilities and real estate as promising areas, benefiting from falling interest rates. Howard expressed that reaching an all-time high in the market is a strong bullish signal and encouraged investors to buy on pullbacks.
Regarding specific sectors to watch, Howard identified financials as likely to strengthen following rate cuts. He explained that while financial stocks might initially dip after a rate cut, they typically rebound and continue to rise. Furthermore, he recommended staying invested in technology stocks.
Howard’s insights could potentially help investors navigate through potential market changes heading into 2025. By focusing on resilient sectors like utilities, real estate, and technology while considering strategic investments in convertible bonds and financials, investors may position themselves well for future gains.
Methodology
We used the Finviz stock screener to compile a list of 20 stocks with a forward P/E ratio under 20. We then selected the 8 best inexpensive stocks that were the most popular among elite hedge funds and that analysts were bullish on. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q2 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A man exhaling smoke from a cigarette indicating the use of tobacco products.
Philip Morris International Inc. (NYSE:PM)
Forward Price-to-Earnings Ratio: 17.54
Market Cap as of September 26: $189.22 billion
Number of Hedge Fund Holders: 70
Philip Morris International Inc. (NYSE:PM) is a multinational tobacco and nicotine company, with products sold in 180+ countries, the most recognized and best-selling one being Marlboro. It has been transitioning towards a smoke-free future, focusing on developing and promoting reduced-risk tobacco products as an alternative to cigarettes.
Its non-tobacco products, like IQOS and ZYN, have shown significant growth in Japan, Europe, and the US. While supply chain issues have affected ZYN in the US and delayed regulatory approval in Taiwan, the company has raised its full-year projections for total revenue, operating earnings, and adjusted diluted earnings per share.
In Q2 2024, revenue was $9.47 billion, recording a year-over-year growth of 5.59%. Despite declining cigarette sales in the US, the company continues to see strong global demand driven by population growth and varying cultural attitudes toward smoking. There was a significant rise in the sales of its tobacco-free products, with sales climbing by 23.5%. The sales of nicotine pouches also experienced a remarkable increase of 50.6%, driven by the success of its ZYN brand, which saw a 50.3% year-over-year increase in the number of cans it delivered, making up roughly 38% of its total earnings in the first 6 months of 2024.
The company’s strong growth and expansion make it a compelling investment choice. To meet rising demand, it has invested $232 million in its Owensboro, Kentucky production plant, which is expected to be completed by 2025 and create 450 jobs and generate $277 million in annual economic benefits for the region. Such expansions show the company’s commitment to becoming a leader in its industry.
Broyhill Asset Management stated the following regarding Philip Morris International Inc. (NYSE:PM) in its Q2 2024 investor letter:
“Philip Morris International Inc. (NYSE:PM) is a multinational tobacco company focused on smoke-free products like heated tobacco and nicotine pouches to create a smoke-free future by transitioning away from traditional cigarettes. The company’s shares gained 12% during the quarter and tacked on another 14% in July. Well-publicized supply shortages, increasing competition from unauthorized products, grandstanding politicians, and a temporary halt to online sales did little to slow PM’s smoke-free momentum, as sales of reduced-risk products grew to nearly 40% of total company revenues. In fact, management expects an acceleration across its smoke-free business in the second half as supply constraints ease, driving substantial upward revisions to guidance and estimates. Notably, Zyn volume guidance (nicotine pouches) for FY24 has increased from 520 million units at the start of the year to 560–580 million units today, with capacity for 900 million cans next year. After three years of sideways trading, investors are finally waking up to the strength and resilience of PM’s earnings power and transition from a manufacturer of traditional tobacco to a faster-growing and significantly more profitable business. The stock’s rally over the last quarter was enough to put it ahead of both the S&P and the Nasdaq for the past three years. But at a now “inflated” 14.5x FY25 consensus estimates (which are likely too low), we think today’s valuation is a long way from discounting the transformation to a smoke-free Philip Morris.”
Overall PM ranks 7th on our list of best inexpensive stocks to invest in now. While we acknowledge the potential of PM as an investment, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than PM but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.