Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

Why British American Tobacco Stock Fell 10.2% in October

By Keith Noonan - Nov 11, 2019 at 10:44AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

A rising toll of vaping-related illnesses and deaths has investors wondering what's next for the tobacco company.

What happened

Shares of British American Tobacco ( BTI 1.20% ) dipped 10.2% in October, according to data from S&P Global Market Intelligence. The stock fell after new data on the number of vaping-related deaths and illnesses was published.

A man using a vape.

Image source: Getty Images.

The U.S. Centers for Disease Control and Prevention (CDC) released a report on Oct. 3 that stated that the incidence of vaping related illnesses in the country had risen to more than 1,000 and that the death toll connected to these illnesses was now at least 18. The next day, the CDC published another report -- raising its death-toll estimate to at least 19 and hiking its projected number of vaping-related injuries to 1,080.

So what

BAT has diversified into the heated-tobacco and vape markets, and tighter regulations on these products could pose a real threat to the company's outlook. The news of the increased illness and death toll came just a few weeks after the company announced that it would be cutting 2,300 jobs as part of its pivot away from traditional cigarettes, and investors reacted to the CDC's new data and advice that people should stop vaping by selling out of the stock.

Now what

British American Tobacco stock has posted some recovery this month, with shares trading up roughly 4.8% in the month so far.

BTI Chart

BTI data by YCharts.

Most of the vaping-related injuries and deaths have been connected to the use of tetrahydrocannabinol (or THC, the main psychoactive ingredient in marijuana), and none of the illnesses or deaths have been directly linked to products from British American Tobacco. Companies with heavy exposure to the e-cigarette space are at risk of a regulatory crackdown, but there's currently not much evidence tying vape products from leading tobacco companies to the recent rise of injuries and deaths, and the pressures have pushed some tobacco stocks to attractive levels.

BAT stock has a dividend yield of roughly 7% and trades at roughly 9.5 times this year's expected earnings.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

British American Tobacco p.l.c. Stock Quote
British American Tobacco p.l.c.
BTI
$35.58 (1.20%) $0.42

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
652%
 
S&P 500 Returns
142%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/08/2021.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Our Most Popular Articles

Premium Investing Services

Invest better with the Motley Fool. Get stock recommendations, portfolio guidance, and more from the Motley Fool's premium services.