E-Cigarettes: Big Tobacco and FDA Start Paying Attention


The proliferation of electronic cigarettes has caused a lot of controversy among cigarette activists and smokers alike. On one side are a number of former smokers of traditional cigarettes (and even a few public health experts) who argue that the e-cigarette is clearly a better alternative health-wise, and a huge boon to people who want to keep using nicotine without the detrimental health effects that accompany lighting up.

On the other hand, you have a growing outcry among anti-tobacco advocates, who argue that many of the flavorings in electronic cigarettes - which include cotton candy and bubble gum - are an obvious marketing ploy to entice younger smokers to a more socially acceptable practice. 

The New York City council is considering a ban on a number of e-cigarettes, as well as a law that would raise the legal age for tobacco purchases up to 21. In a similar spirit, the FDA is considering whether or not sales of e-cigarettes should be regulated online, the Wall Street Journal reported on Friday. Taken together, you see clear efforts pushing back against the first major new product that the cigarette industry has come up with in years. 

Though e-cigarettes at the moment only make up about about 0.5% of the domestic tobacco market, a lot of investors are making bets that share will grow. Silicon Valley investor Sean Parker put $75 million into an e-cigarette developer earlier in the summer, and Lorillard Inc (LOR), the third largest traditional cigarette company in the country, acquired their own e-cigarette company last year. Tobacco bulls are also looking at huge returns worldwide - roughly $2 billion globally - as a sign that the market has a lot of room to grow. 

All the hype has prompted Altria (MO), and Reynolds American Inc. (RAI) to introduce e-cigarette brands as well - indicating that the new technology is likely to continue its path into the smoker's mainstream. 

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1.Lorillard, Inc. (LO, Earnings, Analysts, Financials):Engages in the manufacture and sale of cigarettes in the United States. Market cap at $15.76B, most recent closing price at $41.92.




2.Altria Group Inc. (MO, Earnings, Analysts, Financials):Engages in the manufacture and sale of cigarettes, smokeless products, and wine in the United States and internationally. Market cap at $66.99B, most recent closing price at $33.46.



3.Reynolds American Inc. (RAI, Earnings, Analysts, Financials):Manufactures and sells cigarette and other tobacco products in the United States. Market cap at $26.21B, most recent closing price at $47.98.



(List compiled by James Dennin. Analyst ratings sourced from Zacks Investment Research, all other data sourced from Finviz.)


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Lorillard, Inc.(LO, Chart, Download SEC Filings) Altria Group Inc.(MO, Chart, Download SEC Filings) Reynolds American Inc.(RAI, Chart, Download SEC Filings)



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