Analysts at Morgan Stanley are warning that major U.S. tobacco companies could see profits cut in half if the Food and Drug Administration passes a “maximum nicotine” rule.
The FDA wants to pass regulations within the next 15 years to ensure tobacco products are minimally addictive, which could result in a $165 billion loss for cigarette companies, the bank said.
“Reducing nicotine in cigarettes to non-addictive or minimally addictive levels, in our view, would be a potential game changer for the U.S. industry,” the analysts wrote in a recent research report.
The analysts predict Altria’s market value would drop 20 percent, British American Tobacco by 13 percent, and Imperial Brands by 5 percent.
“We don’t believe a smoker will continue to purchase nonaddictive cigarettes, particularly with the presence of alternative nicotine delivery devices,” the analysts wrote.
They predict cigarette smokers in the U.S. would drop from 13.2 percent of the population to 5 percent in 2030. Tobacco stocks have already seen a drop from mid-2017 to present because of the popularity of JUUL products.
