Imperial Brands chokes as shares drop

Imperial Brands’ stock price fell by 8.9% to £18.79 after it too outlined problems in the US – in its case, the market for vaping products.

AJ Bell said: “It is not a good time to be a vaping company. Political and regulatory pressures are coming down hard on the sector and resulting in fewer US retailers and wholesalers ordering or promoting vaping products. Competition is also fierce, particularly in places like Australia.

“Tobacco companies like Imperial Brands have bet everything on vaping and other smokeless alternatives being the future of their business. While the public has been slowly switching from cigarettes to smoke-free products, there is a growing negative backlash in other circles caused by concerns over the large number of younger people vaping and the potential health threats.

“Stocks like Imperial Brands have historically been bought by investors for their seemingly resilient earnings and generous dividend payments.

“Imperial Brands is highly likely to feature in many people’s pension pots as it has historically been seen as a dependable source of income.

“Many fund managers have been snapping up even more shares in recent years because the sector has been trading on much lower valuation multiples and for the aforementioned income attractions which shine in a low interest rate environment.

“Unfortunately the cigarette industry can no longer be seen as a defensive investment given the increasing political and regulatory concerns. The risks are increasing on a daily basis and Imperial Brands’ troublesome trading update may not be a one-off blip.”