Altria (MO 0.49%) is tumbling after an analyst downgraded the U.S. tobacco giant, saying that inflation and competition will take a toll on the company. 

Shares that had been running more than 20% higher in 2022 have since fallen sharply and are now less than 3% above where they started the year. Although Altria is still doing better than the S&P 500, which is down over 13% year-to-date, the market is worried that the owner of the Marlboro brand of cigarettes will not be able to overcome the headwinds it's facing.

However, as an owner of Altria stock, I'm not worried, and I'm not selling. Here's why.

A new set of hurdles to surmount

The latest hit to Altria's stock was brought on by Morgan Stanley analyst Pamela Kaufman downgrading the stock to underweight from equal weight and dropping her price target from $54 per share to $50, citing the fact that inflation hits low-income consumers harder than most and that they comprise the greatest percentage of smokers.

With gasoline priced at $5 a gallon nationally, and 60% of all cigarettes purchased at gas station convenience stores, Kaufman says consumers will cut back on cigarette purchases as they ration how much gas they buy.

Moreover, the $16 billion acquisition of Swedish Match (SWMAF) by one-time sibling Philip Morris International (PM 0.68%) gives the global tobacco company direct access to the U.S. market, making it less likely Philip Morris needs Altria for the distribution of its IQOS heated tobacco device.

Although IQOS is currently banned from being imported after the U.S. International Trade Commission ruled it infringed on patents held by British American Tobacco, Altria and Philip Morris have been considering work-arounds to the ban, such as manufacturing the device in the U.S.

If Swedish Match becomes a Philip Morris vehicle for getting IQOS to market, Altria will be one of the very few tobacco companies without an electronic cigarette to sell.

More than meets the eye

These are very real concerns, but I don't think it's time to panic. First, while inflation hits Altria's customers hard, they've also proved willing to pay up for cigarettes. It's one reason Altria and other manufacturers are able to pass along excise tax hikes and other costs with price increases two or three times a year and suffer no real impact on their business.  

Smokers might trade down to cheaper brands, which could impact Marlboro sales (and margins), but Altria owns several discount brands including L&M, the second-biggest behind Reynold's Natural American Spirit. 

Moreover, the last time we saw gas prices spike like this was back in 2008 when oil hit $185 a barrel and gas soared to over $4 a gallon, but Altria's sales still rose. Between 2007 and 2009, cigarette sales increased from $18.47 billion to $20.92 billion, a better than 13% increase, while segment operating profits rose 11%.

Just because smokers might not buy as many cigarettes at gas stations does not mean they won't buy them from somewhere else.

A relationship going south?

The Swedish Match acquisition by Philip Morris could be a stickier issue, and might signal a widening divide between it and Altria. Because Philip Morris had dashed hopes of a remerger with Altria last year, this acquisition is seen as a big snub.

Although Altria has the right to extend its IQOS marketing agreement with Philip Morris for an additional five years after the current one expires in 2024, it's based on meeting certain performance goals, and Altria and Philip Morris are in disagreement over whether they've been achieved.

Swedish Match also lets Philip Morris compete directly against Altria in the growing nicotine pouch market, as its Zyn brand owns half the market. While Zyn has been losing share of late, Altria's On! brand is still just a tiny component of its revenue. That's also why it's not a particularly worrisome development. 

It's also not true Altria has no e-cig available: It still has its investment in Juul Labs. While the Juul device has come under heavy criticism for teen e-cig usage and its market share has fallen (and Altria has written off virtually all of the investment), it remains one of the leading e-cigs on the market, and Altria owns 35% of it (British American's Vuse brand reportedly surpassed Juul in market share in recent periods).

Altria could always try to buy the rest of the e-cig maker, but it is also developing two new products of its own that it plans to submit to the Food & Drug Administration for approval by the end of the year or early next year.

Too good to pass up

Obviously the developments over the past month are nothing to dismiss out of hand, but they're not fatal either. The headwinds could even spur the tobacco stock to greater innovation.

At less than 10 times next year's earnings estimates with a dividend that yields 7.3%, and because Wall Street still expects it to continue growing earnings at a compounded rate of 5% annually for the next five years, I find there is no reason to sell my Altria shares. Heck, I just might buy more.