Jim Cramer on Philip Morris International (PM): ‘I Never Recommend Tobacco Stocks’
We recently published a list of Jim Cramer’s Latest Calls: Top 10 Stocks. Since Philip Morris International Inc. (NYSE:PM) ranks 6th on the list, it deserves a deeper look.
Jim Cramer in a latest program said that if companies would “own up” to the changing circumstances, things would be “so much easier” for them as well as investors.
“There is so much information and misinformation flying around at this point in the earnings season that it’s very easy to be led astray,” Cramer said.
Cramer thinks companies are “leaving out” important information which can cause investors to make “faulty decisions.”
As an example, Cramer talked about how food and beverage companies are not talking about the impact of weight loss drugs on their financials
Cramer said that GLP-1 drugs are extremely “powerful” and they cause a decline in cravings for snacks and liquor. This, according to Cramer, directly affects beverage and snack companies. However, Cramer said these companies are intentionally not mentioning the impact of these drugs.
“I wonder how long they can maintain this fiction, it’ll be better if they just own that it’s a problem rather than just ignoring it.”
Cramer was also furious that consumer companies are not admitting that high prices are impacting their financials. He said hotels and entertainment companies raised prices in the past but now they are not willing to bring them down despite facing pricing headwinds.
Cramer also called the claims that huge AI investments are not bringing any solid results for companies “absurd.”
We watched several latest programs of Jim Cramer on CNBC and picked 10 important stocks he’s talking about. With each stock we have mentioned the number of hedge fund investors. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Philip Morris International Inc. (NYSE:PM)
Number of Hedge Fund Investors: 64
Jim Cramer in a latest program affirmed his view on tobacco stocks when he was asked about PM.
“I never recommend tobacco stocks, never have, never will.”
Cramer’s thesis on PM and other tobacco stocks might be because of health issues stemming from tobacco use. But is the stock a good long-term investment?
Goldman Sachs recently added Philip Morris International Inc. (NYSE:PM) to its US Conviction stocks list, saying the stock’s potential in smoke-free products is underappreciated by the market.
Philip Morris International Inc. (NYSE:PM) second-quarter results showed the promising potential of its smoke-free products. Philip Morris International (PM) has gained a significant lead over its competitors, largely due to its successful smoke-free business segment, which generated $3.6 billion in net revenues for the second fiscal quarter of 2024, up 18.3% year-over-year. This segment now represents 38.1% of total sales, up 2.7 percentage points from the previous year. Philip Morris International Inc. (NYSE:PM) efforts in oral nicotine segment are also working. It bought nicotine pouches company Swedish Match in 2022 for a whopping $16 billion. During the second quarter, nicotine pouch sales volume surged by 50.6% year-over-year, with a new guidance of 580 million cans for FY2024, up 11.5% from previous estimates.
The US alternative tobacco market is projected to grow from $23.49 billion in 2022 to $32.05 billion by 2027, at a CAGR of 6.4%, presenting a significant growth opportunity for Philip Morris International Inc. (NYSE:PM).
Andvari Associates stated the following regarding Philip Morris International Inc. (NYSE:PM) in its Q2 2024 investor letter:
“Andvari invested in Philip Morris International Inc. (NYSE:PM) a few months after initiating a position in fellow tobacco company Altria. The tobacco industry is one that has consolidated to only a handful of players. For decades, the industry has more than offset the continual decline in cigarette volumes with price increases. More recently, both Altria and Philip Morris have introduced several new product categories that deliver nicotine in much safer ways: vaping, nicotine pouches, and heat-not-burn products. Nicotine pouches in particular continue to have an extraordinary growth trajectory. In the most recent quarter, the volumes of Altria’s On! pouches and Philip Morris’ Zyn pouches continued their torrid growth rates at 30%+ and 70%+ year over year, respectively.
For Philip Morris and Altria, their margins are high, returns on equity and capital are high, and both trade at what Andvari views as cheap or very cheap multiples. Given the non-zero chance of a “nicotine renaissance” aided by less harmful products, we do not think the future for these companies is as dim as the market seems to think.”
Overall, Philip Morris International Inc. (NYSE:PM) ranks 6th on Insider Monkey’s list titled Jim Cramer’s Latest Calls: Top 10 Stocks. While we acknowledge the potential of Philip Morris International Inc. (NYSE:PM), our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than PM but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.