Philip Morris International: A Smoking Hot Stock Opportunity?

Philip Morris International (PM) has been on a tear lately, with its shares surging on the back of a successful transformation towards smoke-free products. But is it too late to buy the stock, or is there still room for growth? Let's dive into the numbers and find out.



The Transformation

PM's shift towards smoke-free products has been nothing short of remarkable. In just a few years, the company has managed to carve out a significant market share in the reduced-risk nicotine product (RRNP) space. As of Q3 2024, smoke-free products accounted for 38% of PM's total net revenues, up from 36.5% in the previous quarter (Source: PMI Q3 Results 2024). This growth has been driven by strong demand for products like IQOS and ZYN, which have seen impressive sales increases.



Regulatory Tailwinds

PM's transformation aligns with the World Health Organization's (WHO) efforts to tackle smoking, and the company aims to reduce smoking more than three times faster than the target set by the WHO (Source: PMI, 2020). This commitment to public health has earned PM regulatory support and approvals, which have helped drive the adoption of its smoke-free products. For example, in 2024, the U.S. Food and Drug Administration (FDA) approved the marketing of ZYN nicotine pouches, which is expected to boost sales and market share (Source: Philip Morris CEO: We're pleased with FDA approval of Zyn).

The Road Ahead

Looking ahead, PM's prospects for continued growth in the smoke-free segment are promising. The company aims to have more than two-thirds of its net revenue come from smoke-free business by 2030. This ambitious goal is supported by the growing demand for smoke-free alternatives, PM's commitment to innovation and R&D, and the company's strategic focus on expanding access to these products in key markets.



The Verdict

So, is it too late to buy PM stock? Not quite yet, but investors should be cautious. While PM's transformation has been impressive, the stock has already surged significantly, and there may be some short-term volatility as the company navigates the evolving regulatory landscape and competition in the RRNP space. However, PM's commitment to a smoke-free future, strong financial performance, and positive long-term prospects make it an attractive investment opportunity for those with a long-term horizon.

As Jacek Olczak, CEO of Philip Morris International, puts it, "The end of cigarettes is given, it's about setting a date, setting a timetable, setting a path to get there." With PM's transformation well underway, the company is poised to capitalize on the growing demand for smoke-free alternatives and deliver value to shareholders in the long run.

Action Alerts PLUS, which Cramer manages as a charitable trust, is long PM.