We have a $55 12-month target price, based on a combined P/E and DCF valuation. Just before we set the target price, Altria was trading at 11x our 2025 EPS estimate. We think the multiple will largely hold stable as investors appreciate how robust its cash flow and dividend yield are. Applying a 11x multiple to 2025E earnings yields a value per share of $59 and when combined with our DCF-derived value per share of $50 leaves our equally weighted target price at $55.

The following risks could affect our investment thesis and target price: 

- Market Risk – Tobacco stocks move up or down in large part due to sector rotation. This means the stock may rise above our target price, or fall below it, depending on whether the market rotates into or away from defensives. 
- Cigarette volumes -- Currently we are forecasting that U.S. volumes will fall by mid to high single digit in mid term. However, the rate of decline could be worse, or better. 
- Regulation – FDA regulation could help or hurt Altria.  
- Litigation – Although we are quite relaxed at present about US litigation, the threat could worsen, or get less bad. 
- Excise Tax – While we think this is unlikely, several years of large increases in FET would be a negative. 
- ABI - About c.7% of earnings come from ABI. MO could also suffer from large volatility in quarter-to-quarter EPS due to this stake. 
- ESG – The stock could fall if more investors avoid the stocks for ESG reasons. 

If the impact of these risk factors is more negative or more positive than we currently expect, the share price may not reach our target price, or it may exceed it.