London, April 25, 2026, 17:06 BST
Shares of British American Tobacco p.l.c. climbed Friday, following a double upgrade from Morgan Stanley, which bumped the stock up to overweight and put it at the top of its European tobacco picks. The call lent new momentum to a trade focused less on volume, more on cash returns. Overweight, in broker lingo, signals expectations that the stock will outpace its peers or the broader benchmark.
This shift is in focus as investors debate if BAT’s cash payouts are enough to counter years of cigarette decline and stricter nicotine regulations. Shares closed Friday at 4,302 pence, up 1.97%, making BAT a standout on the FTSE 100—where the benchmark dropped 0.75%.
Morgan Stanley bumped its price target to 4,900p from 3,050p, taking a constructive stance on tobacco across European staples—even as “structural declines in combustibles” persist. (Here, combustibles means cigarettes and burnable tobacco.) The bank pointed to the group’s defensive qualities, tight earnings range, solid cash generation, and what it called an undemanding valuation. London South East
Morgan Stanley’s broker note didn’t just hit BAT; it also changed its stance on Imperial Brands, the group’s main UK-listed tobacco competitor. The bank downgraded Imperial to equalweight and lowered its price target to 3,050p, down from 3,200p, according to market reports.
BAT isn’t letting capital returns slip out of focus. On Wednesday, a regulatory filing revealed the company signed on with Merrill Lynch to repurchase ordinary shares between April 23 and June 29. That’s part of a buyback plan first rolled out in March 2024, then stretched in December.
Management hasn’t shown much enthusiasm. Back in December, Chief Executive Tadeu Marroco told Reuters that roughly 70% of the U.S. vape market was still unregulated. “I’m trying to be cautious for 2026,” he said. BAT set its sights on hitting the lower bound of its 3%-5% mid-term revenue growth goal by 2026, looking for adjusted operating profit growth between 4% and 6%. Reuters
Momentum continues in the move away from traditional cigarettes. Back in February, BAT reported a pickup in sales for its newer products, with its Velo nicotine pouch taking a bigger slice of the U.S. market. Interim finance chief Javed Iqbal flagged that the company’s AI-powered productivity initiative is set to influence staffing, saying, “It will have an impact on the size of the organisation.” Iqbal noted it’s too soon to specify job numbers. Reuters
The downside risk is more than just hypothetical. On April 22, UK lawmakers gave the nod to the Tobacco and Vapes Bill, which would push up the legal age to buy tobacco by a year every year for anyone born on or after Jan. 1, 2009. The legislation also tightens restrictions on vaping, nicotine sales, advertising, displays, giveaways, and discounting. Royal assent is still pending.
BAT’s options look much the same as before. It leans on price hikes, buybacks, and nicotine pouches to keep earnings steady. Yet as regulations cut into the pool of future cigarette buyers and clamp down on vape marketing, swapping out those old profits could take longer than hoped.
Morgan Stanley’s upgrade managed to nudge the shares higher, even as the broader market slipped. The real challenge comes down to BAT’s ability to prove that Vuse and Velo have enough momentum to offset dwindling cigarette profits.
