Philip Morris (PM) PT Raised to $193 at UBS, Neutral Rating Maintained

UBS analyst Faham Baig raised the price target on Philip Morris (NYSE: PM) to $193.00 (from $182.00) while maintaining a Neutral rating.

The analyst commented, "PMI's decision to lower US ZYN net price per pouch ("aligning value proposition across ZYN portfolio with Q4 transition of [original] 3mg and 6mg dry variants to 20 pouches/can" implies -25% reduction with no change in list price) leads us to reduce our FY27 US ZYN sales growth forecast to +3% (from +19%), and lower FY27 group organic sales growth estimate to +6.4% (from +6.9%). The impact is partly offset by the Altria contract manufacturing agreement (UBSe $75m). We see modest volume upside from the ZYN pouch/can change, as historical promotions have generated relatively low elasticity and consumer purchasing decisions are typically driven by price per can, which is unlikely to decline...we continue to expect US ZYN volume share to stabilise from early 2027 (UBSe 42% vs c67% in 2023), helped by ZYN Ultra that could benefit from lower nicotine strength additions, in our view. While investor attention is likely to focus on the US ZYN (c5% of FY26E group sales) transition from Q4, we believe IQOS (87% of FY26E smoke-free volumes) remains the key determinant of smoke-free volume growth accelerating from FY27. We continue to see it as unlikely that PMI returns to double-digit smoke-free volume growth, given slowing heated tobacco growth in Japan and limited penetration potential in the US. Nevertheless, a step-up in smoke-free price/mix, operating leverage, and introduction of share buybacks could drive +8-9% pa US$ EPS growth, which can support its valuation multiple, in our view. We reiterate our Neutral rating, raising our price target to $193 (from $182)."

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