NEW YORK — A Credit Suisse analyst downgraded Altria Group Inc. Monday, worried about possibly declining Marlboro prices and the company’s ability to balance profit and market share growth for the cigarette brand.
In separate client notes, analyst Thilo Wrede boosted the price targets of peers Lorillard Inc. and Reynolds American ( RAI – news – people ) Inc.
Wrede said Altria ( MO – news – people )’s Marlboro has been underperforming, and reported market share loss in its most recent quarter. The analyst anticipates the Richmond, Va.-based tobacco company may have to cut prices of the cigarettes as unemployment continues to climb.
Wrede dropped Altria to “Neutral” from “Outperform” and reaffirmed a $20 price target.
The analyst still believes Lorillard is the best tobacco company in the U.S., saying in a separate client note that the Greensboro, N.C.-based business will likely have a strong third quarter.
“Lorillard continues to have the best margins, volume growth outlook and brand equity,” Wrede wrote, adding that the company is drawing budget-conscious smokers with its Maverick brand.
The analyst maintained an “Outperform” rating and raised Lorillard’s price target to $90 from $82. Wrede, in another client note, said Reynolds’ Pall Mall and Grizzly brands may be stronger than initially believed.
“The promotions for Pall Mall appear to be more permanent in nature than initially thought and even though we still believe that they do not maximize the short-term profit of the brand we now see them as a successful – and profitable – long-term investment,” Wrede said.
The analyst also thinks Reynolds’ Grizzly brand is withstanding pricing competition from Altria better than expected.
Wrede increased Winston-Salem, N.C.-based Reynolds price target to $52 from $45 and reiterated a “Neutral” rating.
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