JPMorgan Reinstates BAT at Overweight With 5,300-Pence Target

JPMorgan analyst Edward Hockin reinstated coverage of British American Tobacco (NYSE: BTI) at Overweight on Tuesday, abandoning the bank's previous Neutral stance and setting a price target of 5,300 pence on the company's London-listed shares. The upgrade marks a clear turn in JPMorgan's view of one of the world's largest tobacco companies. Whether the market agrees is a separate question.

In JPMorgan's framing, British American Tobacco is an earnings-per-share compounder — a stock whose value builds through steady per-share profit growth rather than dramatic re-rating. Hockin argues that market-share gains in nicotine pouches and U.S. vaping products could return the company to sales growth of 3% to 5% at constant currency. That is a meaningful claim: it implies the company can grow again despite a shrinking cigarette business. It also rests on smokeless products continuing their current momentum, which no competitor guarantees.

What is driving the upgrade?

British American Tobacco sells cigarette brands including Lucky Strike and Newport alongside Vuse vaping products. The portfolio spans both the declining and the growth ends of the nicotine market. That mix is the crux of the investment case.

The company says the U.S. volume share of its Velo nicotine-pouch brand climbed from 4.4% in January 2024 to more than 30%. If accurate, that is roughly a sevenfold increase in share in about a year — an extraordinary shift in a consumer category. The figure comes from the company itself, however, and JPMorgan's report does not independently verify it. Investors may want to watch whether third-party retail data confirms the trajectory.

What has management promised?

Management has guided toward adjusted earnings-per-share growth of 5% to 8% over the next several years. The company has also planned £1.3 billion of share buybacks for 2026 — money returned directly to shareholders, which mechanically supports the per-share compounding thesis JPMorgan favors.

The guidance carries familiar caveats. A 5% to 8% EPS growth range is wide enough to accommodate very different outcomes, and "several years" is not a precise commitment. Buyback plans can also be cut if cash flow disappoints. For now, both stand as stated intentions rather than delivered results.

On combustibles, the company expects global volumes of cigarettes and other traditional products to decline by about 2.5% a year through 2030. Management says price increases and a richer product mix should keep revenue growing over that period despite the volume erosion. In plain terms: sell fewer cigarettes, charge more for each one, and shift the mix toward higher-value items.

Looking further ahead, management wants smokeless products to account for most of the business by 2035. That is a decade-long transformation target, and it leaves substantial room for the plan to change along the way.

What could go wrong?

The bull case depends on three assumptions holding simultaneously: Vuse and Velo continue taking share, pricing power offsets a 2.5% annual decline in cigarette volumes, and regulators do not disrupt the vaping and pouch categories. The source report addresses none of these risks directly.

Regulatory exposure deserves particular attention. U.S. vaping and nicotine-pouch markets face ongoing scrutiny, and a favorable rule change in either direction could reorder market shares quickly. The 3% to 5% sales-growth projection assumes the current regulatory environment persists.

The takeaway: JPMorgan has made a specific, testable bet — 5,300 pence, backed by a 5% to 8% EPS growth path — and the next several quarters of Velo and Vuse share data will show whether that bet rests on company optimism or market reality.