Is Altria Stock Fairly Valued At $47?
Altria stock (NYSE: MO) is up almost 13% over the last six months and currently trades at $47 per share. Despite being part of the defensive tobacco industry, the stock has registered strong gains over recent months. The recent rise has been on the back of several analysts revising upward their expectations about the company’s earnings for 2021. The stock was affected in the second half of 2020 despite a sharp recovery in the market. This was mainly because of a sharp 88% write down of Altria’s investment in vaping company JUUL Labs, due to public health concerns over the safety of vaping and legal challenges from the Federal Trade Commission. But the vaping market is still expected to grow at a healthy double-digit rate in the coming years. Additionally, after a few quarters of writing down its investment value, Altria has recorded an unrealized gain of $100 million from its stake toward the end of 2020. Also, Altria has decided to sell its winemaking division for $1.2 billion, which will help it concentrate completely on the vaping and cigarette business. These factors have enthused the markets and led to a rise in Altria’s stock. But will Altria’s stock continue its upward trajectory over the coming weeks, or is a correction in the stock more likely?
According to the Trefis Machine Learning Engine, which identifies trends in a company’s stock price data for the last ten years, returns for MO stock average more than 3% in the next six-month (126 trading days) period after experiencing a 13% rise over the previous six-month (126 trading days) period. Also, there is a 58% probability of the stock giving positive returns over the next six months. But how would these numbers change if you are interested in holding MO stock for a shorter or a longer time period? You can test the answer and many other combinations on the Trefis Machine Learning to test MO stock chances of a rise after a fall and vice versa. You can test the chance of recovery over different time intervals of a quarter, month, or even just one day!
MACHINE LEARNING ENGINE – try it yourself:
IF MO stock moved by -5% over five trading days, THEN over the next 21 trading days, MO stock moves an average of less than 1 percent, with more than 53% probability of a positive return.
Some Fun Scenarios, FAQs & Making Sense of MO Stock Movements:
Question 1: Is the average return for Altria Group, Inc stock higher after a drop?
Consider two situations,
Case 1: Altria Group, Inc stock drops by -5% or more in a week
Case 2: Altria Group, Inc stock rises by 5% or more in a week
Is the average return for Altria Group, Inc stock higher over the subsequent month after Case 1 or Case 2?
MO stock fares better after Case 1, with an average return of 0.9% over the next month (21 trading days) under Case 1 (where the stock has just suffered a 5% loss over the previous week), versus, an average return of 0.7% for Case 2.
In comparison, the S&P 500 has an average return of 3.1% over the next 21 trading days under Case 1, and an average return of just 0.5% for Case 2 as detailed in our dashboard that details the average return for the S&P 500 after a fall or rise.
Try the Trefis machine learning engine above to see for yourself how Altria Group, Inc stock is likely to behave after any specific gain or loss over a period.
Question 2: Does patience pay?
If you buy and hold Altria Group, Inc stock, the expectation is over time the near-term fluctuations will cancel out, and the long-term positive trend will favor you – at least if the company is otherwise strong.
Overall, according to data and Trefis machine learning engine’s calculations, patience absolutely pays for most stocks!
For MO stock, the returns over the next N days after a -5% change over the last 5 trading days is detailed in the table below, along with the returns for the S&P500:
Question 3: What about the average return after a rise if you wait for a while?
The average return after a rise is understandably lower than after a fall as detailed in the previous question. Interestingly, though, if a stock has gained over the last few days, you would do better to avoid short-term bets for most stocks.
MO’s returns over the next N days after a 5% change over the last 5 trading days is detailed in the table below, along with the returns for the S&P500:
It’s pretty powerful to test the trend for yourself for Altria Group, Inc stock by changing the inputs in the charts above.
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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