Analysts are Bearish on These 5 Consumer Stocks as Recession Begins

4. Altria Group, Inc. (NYSE:MO)

Number of Hedge Fund Holders: 47

Altria Group, Inc. (NYSE:MO) is a Virginia-based company that manufactures and sells smokable and oral tobacco products in the United States. On June 29, Barclays analyst Gaurav Jain downgraded Altria Group, Inc. (NYSE:MO) to Underweight from Equal Weight, cutting the price target to $36 from $53. According to the analyst, the company has a traditional tobacco business model with “very little in the way” of next generation products. Hence, the analyst thinks the shares deserve a “much lower multiple” than when he factored in potential for a successful business combination with Juul and a possible “white-knight” bid from Philip Morris International Inc. (NYSE:PM). Given soft cigarette volumes, he believes Altria Group, Inc. (NYSE:MO) could slash its fiscal 2022 earnings outlook. The analyst called Altria Group, Inc. (NYSE:MO) a “melting ice cube”. 

According to Insider Monkey’s database, Altria Group, Inc. (NYSE:MO) was part of 47 public hedge fund portfolios at the end of Q1 2022, up from 39 funds in the last quarter. Rajiv Jain’s GQG Partners is the largest shareholder of the company, with 18.30 million shares worth $956.2 million. 

Here is what Broyhill Asset Management has to say about Altria Group, Inc. (NYSE:MO) in its Q2 2021 investor letter:

“Altria (MO) shook off the prospects of a ban on menthol and a potential cap on nicotine and gained 20%. We shared our thoughts on these regulations during the quarter, which are available here.

MO Valuation. MO is up ~ 18% YTD (even accounting for the recent sell-off). We expect MO to generate close to $5 in annual FCF per share over the next few years, putting the stock at ~ 10x, which is less than half the market’s multiple today. Over the last decade, shares have traded at an average multiple of 15x and within a range of ~ 10x – 20x (+/-1 standard deviation). The stock yields 7.2% at the current price, close to a 6% premium to treasuries. Historically, shares have traded closer to a 3% premium to the 10Y, which would imply a ~ $75 share price.”