British American Tobacco share price stubbed out by COVID-19

Like even the most sturdy blue chips stocks, the British American Tobacco share price was hit hard in the run up to the COVID-19 pandemic hitting the financial markets in March. Approximately one third of the BATS share price value of the cigarette manufacturer was lost in a matter of weeks.

While there was an early summer rebound for BATS shares, they peaked at $33 and have since returned towards the lows of the year just below $24. The question now is whether the COVID-19 markdown of around a third was fair, or whether near to year lows BATS shares represent a bargain hunting opportunity.

 

 

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Vaping led revival for British American Tobacco shares

While it may be true that in terms of numbers of people smoking tobacco manufacturers have quite right had something of a sinking feeling, the landscape has been rather more complex than consumers gradually giving up the habit year on year. Set against this we have seen the rise of e-cigarettes and vaping, with myriad new products entering the smoking ecosystem. This has not only reduced the dependency on traditional tobacco products, it has also introduced a younger demographic in terms of sales, something that multinationals of any sector appreciate.

Set against the rise of new products for the tobacco industry, we have seen a kickback against vaping on health grounds, although given that the likes of BAT are past masters at legal battles, this does not look like it will block earnings momentum. Indeed, guidance on the e-cigarettes / vaping is probably going to be the most important aspect from future updates regarding the British American Tobacco share price. 

 

British American Tobacco shares bumper dividend

In terms of the present position for the British American Tobacco share price, it is difficult for investors to ignore how sweet the company is towards them regarding its dividend payout. Given that this is still a stock which yields more than 8% and stands on a price / earnings ratio of half its FTSE 100 peers, we are looking at a value stock in BATS shares whose fundamentals appear very well nailed on. This makes it a company very easy to buy into on dips, especially when caught in the latest general stock market fears regarding the pandemic, which are not specifically related to BATS share price.

 

BATS shares guidance for FY 2020

At the half year stage reported at the end of July, BAT said it was maintaining full year 2020 guidance, something which makes it an exceptional company in current uncertain times. In particular the “new categories” revenues at BAT were up 12.7%, something which underlines the importance of expanding its portfolio. This concept was highlighted recently with the announcement of the acquisition of the nicotine pouch product assets of Dryft Sciences, a further move into the oral nicotine space.

To see all upcoming news and data releases that’ll have an effect on the financial markets, check out our Economic Calendar. It’ll cover all major releases from global economies and give you the exact time the release is due, the previous data, forecast data and actual data (once released).

 

British American Tobacco share price daily chart

As far as what is next is concerned for BATS shares, with the momentum provided by its new products and the way it has so far been able to sidestep the vaping criticism, one would regard the company as a reliable dividend play, lowly rated already, and therefore with any downside limited.

 

Daily chart showing British American Tobacco share price daily movements for 2020

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