Altria Stock Dives As This Decision Threatens To Vaporize Juul Investment

Altria stock slid 9% on Wednesday following a report that the FDA plans to order Juul to pull its electronic cigarettes off the market in the U.S. — posing big risks for the tobacco giant’s investment in the vaping startup.

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The move by the FDA could be announced as soon as Wednesday, said the Wall Street Journal. Altria and Juul did not immediately respond to requests for comment.

The decision comes just a day after the FDA announced intent to require tobacco makers to reduce the amount of nicotine in their products to nonaddictive levels. Any action on that front is likely at least a year away.

Meanwhile, the FDA is attempting to determine whether vaping products from hundreds of companies can still be sold, after asking manufacturers of those products to submit applications demonstrating their products were healthier than traditional cigarettes.

However, the FDA last year held off on making the call on Juul’s products.

Altria, best known for selling Marlboro cigarettes in the U.S., in 2018 said it would take a 35% stake in Juul. But Juul has faced lawsuits alleging misleading health claims, along with allegations it was trying to draw younger consumers to vaping.

Unexpected Move, Altria Stock Responds

The potential decision by the FDA comes as Altria tries to become less of a traditional-cigarette company. However, the company still gets 85% of its profit from those products, Cowen says. The news drove Altria stock to undercut a December low, leaving shares at their lowest level since January 2021.

“MO’s shares are trading down on the news, which is expected, as JUUL was a key piece of the company’s reduced risk strategy,” Cowen analyst Vivien Azer said in a note on Wednesday. “We expect the company to appeal, with the products remaining on the market.”

But she said the decision was unexpected. She said she thought Juul could get limited approvals for some tobacco-flavored vapes, “given that the FDA has acknowledged the role of e-cigs as part of a broader harm reduction strategy, including the implementation of a nicotine cap.”

The FDA on Tuesday announced a proposed measure that would set maximum limits on nicotine in cigarettes. The agency said it hoped the potential rule would reduce cigarette usage among youths.

In February, a judge, in an initial decision, dismissed the Federal Trade Commission’s antitrust charges against Altria’s investment in Juul. The agency in 2020 sued to unwind Altria’s stake.

Altria stock has a 78 Composite Rating. Its EPS Rating is 76.

Among other tobacco stocks, Philip Morris International (PM) lost 1.8%. British American Tobacco (BTI) fell 1.2%.

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