By Peet Serfontein & Hashmeel Suka.
Philip Morris International (PMI) is one of the world's leading tobacco and nicotine-product manufacturers, with leading brands such as Marlboro (the world's top-selling cigarette), Chesterfield and L&M. PMI has undergone a significant transition in its strategy toward smoke-free products through its heated-tobacco units (HTUs) such as IQOS and HeatSticks as well as its ZYN nicotine pouches.
The company has displayed steady growth over the past five years, with adjusted EPS and revenue increasing 3.3% and 3.5%, respectively (on a compounded-annual basis). FY21 was a standout year of growth for PMI (adjusted EPS: +17.6%, revenue: +9.4%) underpinned by the launch of IQOS ILUMA as well as various business acquisitions. Growth since has been relatively soft.
Technically, the stock is trading near the upper boundary of a symmetrical triangle pattern (refer to the first chart) making it an attractive investment opportunity. This pattern, characterised by two converging trendlines of a similar slope, reflects a period of consolidation, whereby demand- and supply-side pressure are almost equal. However, considering that the price is trending toward the apex of the triangle pattern, we expect buying-pressure to prevail, which could lead to an break toward the upside.
The stock is testing its 200-day simple moving average of ~$93.62, and we maintain a bullish stance.
Emerging upside momentum, according to the MACD indicator as well as sidewards movement of the on-balance volume indicator, supports our bullish view.
Share Information
| Share Code | PM US |
|---|---|
| Industry | Food, Beverage & Tobacco |
| Market Capital (USD) | ~146 billion |
| One Year Total Return | 3.21% |
| Return Year-to-Date | -0.14% |
| Current Price (USD) | 93.95 |
| 52 Week High (USD) | 101.92 |
| 52 Week Low (USD) | 87.23 |
| Financial Year End | December |
| The stock has displayed moderate price fluctuations over the past year. |
Consensus expectations
(Bloomberg)
| FY23 | FY24E | FY25E | FY26E | |
|---|---|---|---|---|
| Headline Earnings per Share (USD) | 6.01 | 6.41 | 7.03 | 7.71 |
| Growth (%) | 6.59 | 9.74 | 9.69 | |
| Dividend Per Share (USD) | 5.14 | 5.27 | 5.48 | 5.69 |
| Growth (%) | 2.59 | 3.94 | 3.74 | |
| Forward PE (times) | 14.38 | 13.11 | 12.18 | |
| Forward Dividend Yield (%) | 5.66 | 5.88 | 6.05 | |
| The market expects a strong improvement in both top-and bottom-line growth over the medium term. | ||||
Buy/Sell Rationale
Technical Analysis:
Long-term fundamental view:
| Share Name and position | CVX - Buy (Continue to hold) |
BRY - Buy (Continue to hold) |
VWO - Buy (Continue to hold) |
|---|---|---|---|
| Entry | 147.89 | 7.14 | 41.57 |
| Current | 155.70 | 7.21 | 41.86 |
| Movement | 5.3% | 1% | 0.6% |
| The price is holding above key support. The stock remains below its 200-day moving average and we maintain a counter-trend strategy. Emerging upside momentum is supportive Our profit target is $167, with a stop-loss of $149 Exit the position around 28 June 2024. | The formation of a falling wedge pattern remains attractive. The stock remains close to its 200-day moving average and we maintain a counter-trend strategy. Upside price momentum remains supportive. Our profit target is $8.50, with a trailing stop-loss at $6.7. Exit the trade by 5 June 2024. | The development of a symmetrical triangle pattern remains of interest. The ETF remains above its 200-day moving average. Upside price momentum is encouraging. Our profit target is $48, with a trailing stop-loss of $40.70. Exit the position around 14 June 2024. |
| Share Name and position | BDX - Buy (Continue to hold) |
CMCSA - Buy (Continue to hold) |
BMY - Buy (Continue to hold) |
|---|---|---|---|
| Entry | 239.07 | 43.19 | 53.28 |
| Current | 237.17 | 42.82 | 52.49 |
| Movement | -0.8% | -0.9% | -1.5% |
|
The presence of a well- established price range remains attractive. The stock is trading below its 200-day moving average and we maintain a counter-trend strategy. Fading upside momentum is a concern.
Our profit target is $265, with a trailing stop-loss of $230. Exit the position around 24 April 2024. |
The stock is in an accumulation phase. The stock is testing its 200-day moving average and we maintain a counter-trend strategy. Fading downside momentum is supportive
Our profit target is $48, with a trailing stop-loss of $41. Exit the position around 5 June 2024. |
Price action near the lower two-standard deviation line (per regression channel analysis) remains of interest. The stock remains below its 200-day moving average and we maintain a counter-trend strategy. Upside momentum is supportive.
Our profit target is $60, with a trailing stop-loss of $51. Exit the position around 4 October 2024. |
