Analyst Note
| Philip Gorham, CFA, FRM |British American Tobacco reported full-year 2020 results essentially in line with our forecasts. We are reiterating our GBX 4,300 fair value estimate and wide moat rating. The stock remains materially undervalued, in our opinion, but a disparity is emerging in the long-term outlook between Philip Morris International, which dominates the heated tobacco category, and its competitors. While we think the cash flows from the core cigarette business are being underappreciated, we would prefer to see a bolder vision for migrating consumers to next generation products.