BAT’s menthol vape wins stay of execution

Tobacco giant British American Tobacco PLC (LSE:BATS) has been granted a permanent stay on its menthol vape product pending a US court review, according to a research report published by Jefferies.

This decision essentially ensures that BAT’s menthol vape, a significant product within its portfolio, is unlikely to be removed from the market anytime soon.

Jefferies sees the stay, which comes amid broader regulatory scrutiny over menthol and flavoured vapes, as a bullish signal for BAT’s share price.

“We think the most likely outcome now is that menthol never actually comes off the market, and this particular court case never actually sees a conclusion,” wrote Jefferies.

According to analysts, this development not only safeguards around 75% of BAT’s US vape sales, but also positions the company favourably as it prepares to apply Bluetooth age-verified technology.

The technology, which aims to address regulatory concerns over youth access to vaping products, is expected to be expedited by the FDA, further bolstering BAT’s market position. 

As the popularity of smoking alternatives, primarily vapes, surges, Big Tobacco firms have made strategic inroads into the rapidly growing sector.

But the prevalence of underaged vaping, combined with the environmental concerns surrounding single-use vapes, have resulted in intense regulatory scrutiny over the devices.

The UK has thrown its weight behind a total ban on single-use vapes, while they are already banned from being imported into Australia.

Flavoured vapes and colourful packaging are also under review.

Yet with a stay of execution for BAT’s cornerstone vaping product, the Big Tobacco big cap remains a buy stock with a 3,300p price target in Jefferies’ books.