British American Tobacco: Modern Oral-Driven Growth, Regulatory Tailwinds, and Undervalued Buy Opportunity

Bank of America Securities analyst Bastien Agaud has reiterated their bullish stance on BATS stock, giving a Buy rating on January 9.

Bastien Agaud has given his Buy rating due to a combination of factors that highlight both resilient growth prospects and attractive shareholder returns. He underscores that British American Tobacco’s long-term sales and profit trajectory is increasingly driven by its Modern Oral portfolio, which is expected to account for more than half of future top-line growth and support mid‑single‑digit revenue and EBIT expansion. Agaud also points to the potential incremental benefit from stronger US enforcement against illicit vaping products, which could meaningfully lift forecasts by the end of the decade. In addition, he notes the company’s improving leverage profile, which should allow for ongoing share repurchases from 2027 onward and translate into a solid compound annual growth rate in earnings per share.

Agaud’s positive stance is further underpinned by valuation and regulatory catalysts. He highlights that the stock trades on a forward price-to-earnings multiple materially below the broader European staples sector, while also offering a high and growing dividend yield, making the risk‑reward compelling. He identifies the expected US regulatory clearance of the next‑generation Velo product as a potential near-term share price trigger. Finally, he argues that a more unified European regulatory framework could broaden Modern Oral adoption in key regions, reinforcing British American Tobacco’s growth strategy and justifying the reiterated Buy recommendation and price objective.

In another report released on January 9, UBS also reiterated a Buy rating on the stock with a £52.00 price target.