How U.S. Government Tobacco Restrictions Drove A Slide In Altria Stock

+27.17%
Upside
45.15
Market
57.42
Trefis
MO: Altria Group logo
MO
Altria Group

Altria stock (NYSE: MO) dropped more than 9% in just the last one week (five trading days) and currently trades at $47 per share. MO stock dropped after news reports came out saying the Joe Biden administration is considering new restrictions on tobacco products sold in the U.S.  Sources claimed that the government is contemplating a major reduction in nicotine levels to make tobacco products less addictive. The FDA is also mulling a complete ban on methanol cigarettes as methanol makes cigarettes seem less harsh and more appealing to new smokers and young people. If these measures are implemented, it would target the type of cigarette smoked most frequently by people in the 12 to 17 years age group, eventually leading to a drop in cigarette volume sold by Altria in the coming quarters. News of these new measures affected Altria stock and other companies in the tobacco sector, a sector which is already affected by changing consumer preferences and health consciousness.

Now, is MO stock set to fall further or could we expect some recovery in the stock? We believe that there is a modest chance of a rise in MO stock over the next month (twenty-one trading days) based on our machine learning analysis of trends in the stock price over the last ten years. See our analysis on Altria Stock Chances Of Rise for more details.

Five Day: MO -9.4%, vs. S&P500 0.04%; Underperformed market

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(Extremely rare event)

  • Altria Group, Inc stock declined 9.4% over a five-day trading period ending 4/23/2021, compared to a broader market (S&P500) rise of 0.04%
  • A change of -9.4% or more over five trading days is an extremely rare event, which has occurred 23 times out of 2516 in the last ten years

Ten Day: MO -8%, vs. S&P500 1.4%; Underperformed market

(4% likelihood event)

  • Altria Group, Inc stock declined 8.0% over the last ten trading days (two weeks), compared to a broader market (S&P500) rise of 1.4%
  • A change of -8% or more over ten trading days is a 4% likelihood event, which has occurred 88 times out of 2511 in the last ten years

Twenty-One Day: MO -4.3%, vs. S&P500 7.7%; Underperformed market

(19% likelihood event)

  • Altria Group, Inc stock declined 4.3% the last 21 trading days (one month), compared to a broader market (S&P500) rise of 7.7%
  • A change of -4.3% or more over 21 trading days is a 19% likelihood event, which has occurred 474 times out of 2500 in the last ten years

Out of 22 instances in the last ten years that Altria Group, Inc (MO) stock saw a five-day decline of 9.4% or more, 11 of them resulted in MO stock rising over the subsequent one-month period (21 trading days). As a similar change has occurred very few times historically, we can’t directly use historical trends to draw a conclusion. However, keeping in mind the fact that the stock has seen an unusually sharp drop in price over the last five days, we believe that the trend will likely reverse over the coming month.

While Altria stock may have moved, 2020 has created many pricing discontinuities which can offer attractive trading opportunities. For example, you’ll be surprised how the stock valuation for Coca-Cola vs Merck shows a disconnect with their relative operational growth. You can find many such discontinuous pairs here.

 

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