Daily Pouch Money 6 June 2025

 

It’s been an incredible year for British American Tobacco. At the time of writing, NYSE: BTI is up a bumper 26.41% this year. But can the stock push on further? And what are the chances of getting near its late-2017 ATH?

BTI in H1 2025

On June 4th, 2025, BTI was valued at $46.18. That constituted a more than 25% rise throughout 2025. The S&P 500 is up almost 2% during the same period, with the Nasdaq-100 posting a gain of just under 4%.

There are a few key reasons why BTI has had a great H1, including:

  • Revenue growth target ticked up from 1% to 1-2%.
  • VELO Plus and raised cigarette prices reenergised BAT’s performance in the US.
  • glo Hilo (heated tobacco) has shown strong growth in Poland, the Czech Republic, and Spain.
  • The 2025 share buyback programme has gone up to £1.1 billion, suggesting better returns for investors.
  • A high dividend yield of around 6.6%–7.4% has attracted and retained investors.

Can BTI beat the S&P 500?

The mood around S&P 500 year-end 2025 targets has improved of late, but tariff and trade policy uncertainties are still there. Goldmans Sachs, BMO, and Morgan Stanley are in the 6,500 to 6,700 range, while Barclays and UBS are more cautious at around 6,000.

If these predictions are correct, we’re looking at an increase of around 8-12% by year-end. So, can BTI beat that?

H2 revenues

Global cigarette sales are on the decline, with US combustibles down around 9%. Combustible cigarettes made up 82.5% of BAT’s revenues in 2024, so it’s clear that any positive revenue growth depends on:

  • Further increases in combustible pricing.
  • Next-gen products.

Repeating the trick of increasing combustible prices might not work during the back end of 2025, so what are the next-gen products that could provide much-needed momentum?

VELO Plus

VELO Plus has achieved “triple-digit growth” in the first half of 2025. BAT’s nicotine pouch rose 550 basis points to capture nearly 12% of the US oral tobacco market. Globally, VELO has almost 30% of pouch sales in BAT’s top seven markets, as well as being the leading brand

In Africa, Middle East, and Europe (AME) regions.

Just as significant are VELO’s trial and retention rates. While exact figures are elusive, the brand has described its retention rates as “superior”, highlighting the potential of pouches to add significantly to BAT’s bottom line.

Vuse

Revenues are less positive when it comes to BAT’s flagship vaping product, Vuse. Flat sales in 2025 are attributed to the rise of illicit disposable vapes, especially in the US. However, that could all change with major rollouts of the Vuse Ultra planned for the U.S., UK, France, and select European and Asian markets in H2 2025.

The Ultra is marketed as a premium option. Feedback from pilot markets, such as the UK and France, has been positive, with consumers citing better vapour quality, improved device reliability, and more appealing flavour options.

It’s worth noting that Vuse holds a 40% value share in tracked vape markets. Annual vaping market CAGR estimates range from 14% to 25% in the US, so even defending that value share is something for BAT executives and investors to get excited about.

glo Hilo

glo Hilo is BAT’s latest heated tobacco device. The heat-not-burn (HNB) market is expanding rapidly, and analysts suggest a compound annual growth rate (CAGR) of 23.5% will see a $26 billion market grow to $178 billion by 2023. Other analysts are more bullish and expect HNB to be worth $900 billion by 2030.

The newer glo Hilo device could help BAT gobble up some of this significant market. Recent trials in Serbia saw retention rates double, with consumers raving about improved design, usability, and flavour.

Competition is stiff, especially in Japan, where Philip Morris’s IQOS is well-received by locals. In Poland, the Czech Republic, and Spain, glo Hilo is gaining market share, so it’s a key piece in BAT’s portfolio, and especially important if the brand wants to counter declining combustible sales.

Final thoughts

Despite BAT’s elevated P/E ratio of 24.5x, some analysts suggest the stock is still undervalued. It’s clear that much depends on VELO, Vuse Plus, and glo Hilo’s reception during the second half of 2025. Positive trials suggest the quality is there.

For BAT’s other products, market share gains for Natural American Spirit and Lucky Strike could mitigate overall combustible revenue declines, or at least offer some short-term stability.

If you can eat the macroeconomic and regulatory risks, BAT could produce decent returns by year-end. Aggressive federal enforcement, steep tariffs, and state-level restrictions in the US could constitute a tacit ban on disposable Chinese vapes. That would be enough for BAT to beat a muted market by a considerable distance.