Should I buy, sell or hold Altria stock in 2025?

Altria Group (Missouri 0.72%) Thanks to its impressive earnings rebound, it has emerged as a surprise stock market winner in 2024. As of this writing, the stock has surged 41% this year to its highest level since 2019.

There’s a lot for investors to like about the tobacco giant, including the stock’s 7% dividend yield as an attractive income opportunity. In other words, is there enough positivity to keep the rally going?

Let’s discuss whether Altria stock is a buy, sell, or hold in 2025.

When purchasing or holding Altria stocks

The tobacco industry has undergone dramatic changes in recent years. Even as smoking rates continue to decline globally, consumers are increasingly seeking alternatives to quitting smoking.

These include e-cigarettes and oral cigarettes, which are seen as less harmful alternatives and have proven to be highly popular. Altria, a leading American cigarette manufacturer known for iconic brands such as Marlboro and Parliament, appears to be successfully navigating these changing market dynamics by diversifying into smokeless products.

The company’s third quarter (the period ended September 30) saw adjusted earnings per share (EPS) rise 7.8% year over year, driven by better-than-expected revenue numbers and cost control efforts. .

Image source: Getty Images.

Altria’s NJOY e-cigarette brand saw a 16% increase in consumable cartridge shipments, increasing the company’s retail market share to 6.2% from 3.2% in the third quarter of 2023. Another thing that stands out is that ON! Nicotine pouch volume increased by 46%.

On the tobacco side, Altria balanced low sales volumes and high prices, especially in the premium category, to support company-wide cash flow. For full-year 2024, management is targeting adjusted EPS in the range of $5.07 to $5.15, representing growth of 2.5% to 4% from 2023.

This is good news for investors, considering the sustainability of the $1.02 per share quarterly dividend. The company is recognized as a Dividend King, having increased its annual payouts for the past 55 years, and management has reaffirmed its commitment to continuing this streak until at least 2028. There are good reasons to buy or hold shares today, with investors confident in Altria’s ability to remain profitable and viable over the long term.

MO Dividend Yield, YCharts data.

Altria stock selling case

It is important to critically examine Altria’s prospects to understand what could be wrong with the investment idea.

The major challenges facing the company will come from a highly competitive industry environment. ON! Nicotine pouches are contributing to growth but are struggling to match ZYN’s success. Philip Morris International. ON category market share 19.1%! That’s down 3.8 percentage points from last year, compared to ZYN’s 73% market share.

There are also questions about how the category will evolve, given Altria’s NJOY brand positioning and the fact that consumers have many alternative technologies to choose from. Philip Morris, for example, plans to launch its Iqos Iluma cigarette smoker product across the U.S. late next year, which could potentially eat into NJOY’s market share if users decide to switch.

All of this exists against a backdrop of complex federal and state-level regulations, adding another layer of risk that could undermine Altria’s growth prospects. Investors who are skeptical of the company’s viability over the next decade may consider exiting their positions or reducing their exposure.

Decision: I am optimistic

For all the uncertainty that investors must balance, my takeaway is that Altria’s business is well on its way to 2025. The growth of our lead-free product portfolio provides financial runway while opening new doors to strategic flexibility.

What I like about it as a buy now is its attractive valuation. In addition to the high-yield dividend, the stock trades for a forward price-to-earnings (P/E) ratio of just 11x consensus 2024 EPS. This is well below Philip Morris’ forward P/E of 19.

My interpretation is that the stock is undervalued compared to its larger competitors. Ultimately, Altria stock offers excellent value that can benefit investors within a diversified portfolio.