British American Tobacco p.l.c. (BTI): A Bull Case Theory

We came across a bullish thesis on British American Tobacco p.l.c. on Coughlin Capital’s Substack by Brian Coughlin. In this article, we will summarize the bulls’ thesis on BTI. British American Tobacco p.l.c.’s share was trading at $51.59 as of July 18^th. BTI’s trailing and forward P/E were 28.29 and 11.11 respectively according to Yahoo Finance.

British American Tobacco (BTI) has seen a dramatic turnaround since early 2025, when persistent concerns over menthol regulation, Canadian litigation, and sluggish New Category performance left the stock deeply discounted at 8x earnings and nearly 8% dividend yield. Two major overhangs have since cleared: the FDA’s long-threatened menthol ban was withdrawn in January, securing Newport’s key U.S. profit stream, and a Canadian court finalized the Imperial Tobacco Canada settlement, easing fears of a sudden balance sheet hit.

These developments allowed investors to refocus on improving fundamentals, with BTI’s smokeless portfolio finally contributing to growth. Velo, its nicotine pouch brand, has emerged as the clear driver, with U.S. share doubling to 11.9% by mid-2025 and sales growing at triple-digit rates following the Velo Plus launch. In a category expected to grow 25–30% annually, Velo’s momentum positions it to meaningfully challenge Philip Morris’s ZYN leadership. BTI’s broader New Category portfolio, including Vuse (the #1 U.S. legal vape) and glo heated tobacco, turned profitable in 2024, shifting from a cash drain to a growth contributor.

Meanwhile, the U.S. cigarette business has stabilized, aided by premium brand pricing and smokeless gains, and management continues disciplined capital allocation, with £7.9 billion in 2024 FCF, leverage down to 2.44x, dividend increases, and an expanded £1.1 billion buyback funded partly by the sale of its ITC stake. Despite a nearly 50% stock rally to $51, BTI remains inexpensive at 11x forward earnings and a 6% yield, offering investors resilient cash flows, improving fundamentals, and further upside potential if Velo continues to gain share and narrow the valuation gap with peers.

Previously we covered a bullish thesis on British American Tobacco p.l.c. (BTI) by Brian Coughlin in April 2025, which highlighted Velo’s rapid U.S. share gains, attractive valuation, and BTI’s strong positioning in nicotine pouches. The company’s stock price has appreciated by approximately 23.33% since our coverage as Velo’s growth accelerated and sentiment improved. The thesis still stands as valuation remains compelling and upside potential persists.

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Disclosure: None.