Altria Pivots Strategy in Vaping but Pays a Full Price Again

Altria has shifted gears in its strategy to operate in the U.S. vaping category with the announcement that it will acquire U.S. vape manufacturer Njoy Holdings for an initial $2.75 billion and will swap its remaining equity interest in Juul Labs for nonexclusive rights to Juul's heated tobacco intellectual property. We are retaining our $52 fair value estimate, implying 10 times 2023 earnings, based on low-single-digit revenue growth and slowly fading margins. These transactions do not materially affect those forecasts, and Altria itself did not change its guidance for this year, but we view the acquisition positively from a strategic point of view because it keeps Altria's real options alive as the industry shifts from cigarettes to substitute categories.