Altria's Stock Falls Further But RBC Says Don't Buy The Dip

By Tomi Kilgore Markets MarketWatch Pulse

Shares of Altria Group Inc. continued to fall in premarket trade Monday, in the wake of a new Food and Drug Administration proposal to lower nicotine levels in cigarettes, with RBC Capital warning investors not to buy the dip. The stock fell 1.8% ahead of the open, after plunging 9.5% on Friday, which was the biggest one-day tumble since November 2008. RBC analyst Nik Modi upgraded Altria to sector perform from underperform but kept his stock price target at $62, which was 7.4% below Friday's closing price of $66.94. Modi said large regulatory price shocks have in the past 20 years created buying opportunities, but he believes this time is different. Among his concerns, Altria is not a buyout candidate, valuation is only "fair," fundamentals remain under pressure following disappointing second-quarter results and "we are not going to make a leap of faith" on the launch of the company's new smokeless cigarette product IQOS in the U.S. given limited visibility on regulatory issues. The stock has lost 1.0% year to date through Friday, while the SPDR Consumer Staples Select Sector ETF has gained 7.0% and the S&P 500 has climbed 10.4%.

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