British American Tobacco (BATS) is on track for 2% growth in revenue and adjusted profit in 2025, with gains in the US market for combustibles, nicotine pouches, and vapes. The US business, accounting for 45% of first-half revenue, is improving and expected to see revenue and profit growth in 2025 despite past challenges.

US combustibles volume decline is slowing to 8% for the year, with BAT aiming to maintain volume share and gain value share. Velo Plus nicotine pouches saw a significant increase in market share to 21.9% in October. Vuse vape is set to take 70 basis points of share and remains a market leader in the US legal vape market.

Fair value estimates for BAT have been raised to GBX 4,350/USD 58 from GBX 4,150/USD 55 due to a more positive outlook on long-term growth. The US market is a key driver of the increased outlook, with expectations for continued success of Velo and Vuse. Altria is seen as undervalued for tobacco exposure.

BAT’s fair value estimates have increased, but shares remain fairly valued. Philip Morris’ Zyn is expected to lead the market, with Velo in second place. Vuse is anticipated to benefit from increased enforcement of illicit vapes. Concerns about recent headwinds on nicotine pouch growth and premium cigarette downtrading may be overstated.

Read more at Morningstar: British American Tobacco: Raising Fair Value Estimate as US Business Rebounding in 2025