Jefferies sees upside potential for British American Tobacco p.l.c. $BATS (+0.61%)after the company invited the management team to a conference last week.
Analyst Andrei Andon-Ionita said the firm has seen renewed confidence in the tobacco giant's volume growth in the oral nicotine pouch business as innovation potential may be unlocked in the US.
"The company believes that the volume of oral nicotine pouches in the US could almost double over the next three years, assuming per capita consumption remains stable. In addition, per capita consumption of US Velo (2-3 pouches/day) remains lower than in other markets (Sweden >12x/day, UK 5-6x/day), which we attribute to slower adoption of innovation compared to other markets," Andon-Ionita wrote.
The continued growth of the category will be supported by further innovation, as the success of Velo Plus in 2025 has already shown.
Jefferies is also cautiously optimistic about the enforcement of the ban on illegal e-cigarettes in the US and the stabilization of the tobacco products business in the US.
British American Tobacco appears to be in the early stages of a successful transition to a portfolio focused on smoke-free products.
