LONDON (ShareCast) - (Sharecast News) - UBS upgraded British American Tobacco on Monday to 'buy' from 'neutral', hiked the price target to 3,900p from 3,000p and made the stock its 'top pick'.
The bank said it expects BAT's Velo nicotine pouches to accelerate sales growth in New Categories to 16% in FY26, enabling the group to deliver its 2026 outlook.

"Also, there could be flexibility in BAT's 25.5% stake in ITC, for larger buybacks/ debt reduction," UBS said, which could lead to a re-rating.

As a result, UBS said, BAT's estimated FY26 'stub' price-to-earnings of 6.6x is low.

"Helped by USD strength, we raise our FY25/26 EPS estimates by +3%/+5% - similarly above consensus including Canada - and raise our target price to £39.0 (from £30.0), which is based on a FY26E P/E of 9.5x (-10% discount to the tobacco sector versus -7y average of circa -20%), rolled-forward," it said.

At 1355 GMT, the shares were up 4% at 3,126p.

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