Deutsche Bank Downgrades Altria to Hold Amid NJOY Lawsuit Uncertainty

Deutsche Bank has revised its rating for Altria Group, Inc. (MO.US) from "Buy" to "Hold," setting a target price of $60 per share. This decision comes in response to recent challenges that limit the stock's upside potential and the uncertainty surrounding the NJOY lawsuit. The U.S. International Trade Commission (ITC) has been involved in the case, adding to the complexity and risk associated with Altria's legal battles.

The ITC's ruling in January determined that NJOY ACE electronic cigarette products infringe on four patents held by Juul Labs. As a result, a limited exclusion order and a cease-and-desist order were issued, prohibiting the import and sale of NJOY ACE until the patents expire in 2034 and 2037. This ruling means that Altria will no longer be able to sell NJOY products in the United States, leading to a significant decline in NJOY's revenue starting from the second quarter.

Looking ahead, Altria has several potential paths forward, including appealing the ITC's decision to a federal court, negotiating a settlement with Juul, or seeking FDA approval for NJOY through a substantial equivalence exemption. Despite these potential challenges, Deutsche Bank's analyst team believes that Altria's 2025 fiscal year price-to-earnings ratio of 11.3 times and EV/EBITDA of 6.9 times are reasonably valued, considering the potential earnings leverage factors.

Investors are advised to closely monitor the developments in the NJOY lawsuit and other legal challenges that Altria may face, as these factors could significantly influence the company's stock price and overall market sentiment. The downgrade reflects a cautious outlook on Altria's near-term prospects, given the ongoing legal uncertainties and the potential impact on the company's financial performance.