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Crackdown on E-Cigarettes Pushes Shares of Altria Group 7% Higher Wednesday

By Daniel Miller – Sep 12, 2018 at 3:15PM

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The FDA's announcement that teen usage of e-cigarettes has reached frightening levels has traditional tobacco companies surging Wednesday.

What happened

Shares of Altria Group, Inc. (MO 0.27%), a tobacco company with brands such as Marlboro, Black & Mild, and Copenhagen, among many others, are up nearly 7% as of 12:50 p.m. EDT after the Food and Drug Administration announced it might ban all flavored e-cigarettes.

So what

As a group, tobacco stocks jumped Wednesday after the FDA threatened to pull e-cigarettes due to their widespread popularity with teens. The FDA chief went as far to say teenage use of e-cigarettes had reached "an epidemic proportion." Five brands in particular -- Juul, Altria's MarkTen, Imperial's Blu E-cigs, BAT's Vuse, and Japan Tobacco's Logic -- have been ordered to create plans within 60 days specifying how they will address teen e-cigarette usage and how they will work to prevent teens from using their product going forward. 

A traditional cigarette and e-cigarette in the palm of a hand

Image source: Getty Images.

Now what

MO Chart

MO data by YCharts.

Investors clearly welcomed the FDA crackdown, as e-cigarette products have been a growing threat to big tobacco companies, even if some have created their own e-cigarette brands. Wednesday's stock price pop could prove short-lived if the FDA's move ends up being simply a reprimand rather than a sign of a stronger regulatory stance in the future, but for now it's a clear positive development for traditional cigarette companies.

Daniel Miller has no position in any of the stocks mentioned. The Motley Fool recommends Imperial Brands. The Motley Fool has a disclosure policy.

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