The electronic cigarette market is rapidly evolving from a combination of market forces, innovation, and regulation. Just like the e-cig leaders of yesterday aren't the ones we see today, they're likely not going to be the ones leading the way tomorrow.

Juul Labs currently owns most of the U.S. e-cig market with an 80% share, but regulatory changes eliminating most flavors and limiting where its products can be sold could tip the balance again. With the industry in flux and international markets being introduced to the latest technological developments in electronic cigarettes, here in no particular order are the top three e-cig stocks for 2019.

Man using a electronic cigarette

Image source: Getty Images.

Philip Morris International

Spun off from Altria (MO -0.10%) a decade ago, Philip Morris International (PM 0.09%) has captured the largest foreign market, Japan, with its IQOS heated tobacco device. Unlike other e-cigs, which heat a nicotine-infused liquid to create a vapor, the IQOS heats real tobacco, which gives it a more-natural cigarette flavor. And this year, the company has begun introducing the device into more countries in Europe, Japan, and Russia.

Perhaps most important, it is waiting for the Food and Drug Administration to approve the IQOS for sale in the U.S., possibly with a reduced-harm label, which could give it a marketing advantage over its competitors. The reduced-risk label would mean it could tell smokers who switch to its e-cig that they will have less harmful side effects from using its device. The IQOS would be marketed here by Altria under its Marlboro brand.

But if the FDA doesn't award it a reduced-risk label, the IQOS would have to fight for market share just like every other device, and Philip Morris couldn't count on the kind of success it enjoys in Japan. That country regulates the liquids in e-cigs more strictly, so competition has been virtually eliminated. Still, the more cigarette-like flavor could draw many users in.


Altria is included here not only because of the benefit it would derive from marketing the IQOS, but also because it is taking a minority stake in Juul Labs, maybe as something of an insurance policy should things go awry with Philip Morris.

That would, of course, mean it's also riding the same horse as the market leader, putting it into the industry's forefront by extension. But also, if the IQOS is approved, Altria would have two entries in the race. The risk is the extra scrutiny Juul is bringing upon itself because of its leadership position and its popularity among teens.

Altria withdrew its own e-cig brands from the market just before the FDA issued its new regulations. The MarkTen brand had been the third biggest seller on the market behind Juul and Vuse, but now Altria has cleared the decks for introduction of the IQOS so that it's not competing against itself.

British American Tobacco

Because British American Tobacco (BTI 0.96%) has the second biggest e-cig brand with Vuse, it can't be counted out, even if its share of the market has steadily dwindled. But it also has a heated-tobacco product --  the glo iFuse -- that it is rolling out. And it plans to submit an application to the FDA to have it marketed here. It may be waiting to see what happens with the IQOS before jumping in.

British American has a broad portfolio of cigarette alternatives beyond its e-cig and vapor products. They now account for 900 million pounds ($1.1 billion) in revenue. The glo has been introduced into 16 markets so far and has about a 5% share in Japan. And in the U.S., volumes of the Vuse e-cig are up 30% year to date.

But the company operates at something of a disadvantage because it has often been second-to-market with a product, which has given its competitors the opportunity to stake out large claims ahead of it, which it then has to chip away at. Still, it is a global player in both combustible and electronic cigarettes, and with one of the most diversified portfolio of products, it can't be ignored.