{"id":15833,"date":"2023-05-30T16:51:16","date_gmt":"2023-05-30T20:51:16","guid":{"rendered":"https:\/\/ifintechworld.com\/markets\/does-philip-morris-stock-have-upside-potential-to-its-pre-inflation-peak\/"},"modified":"2023-05-30T16:51:17","modified_gmt":"2023-05-30T20:51:17","slug":"does-philip-morris-stock-have-upside-potential-to-its-pre-inflation-peak","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=15833","title":{"rendered":"Does Philip Morris Stock Have Upside Potential To Its Pre-Inflation Peak?"},"content":{"rendered":"<div>\n<p><strong data-ga-track=\"ExternalLink:https:\/\/www.trefis.com\/data\/companies\/PM\/\">Philip Morris stock<\/strong> (NYSE: PM) currently trades at $91 per share, around 19% below its level of $112 on Feb 17, 2022 (pre-inflation shock high), and it seems like a good investment opportunity. Philip Morris saw its stock trading at around $99 at the end of June 2022, just before the Fed started increasing rates, and is still 8% below that level. In comparison, the S&amp;P 500 gained about 10% during this period. The stock price has suffered over recent months due to a Q1 decline in the volume of cigarettes sold, lower margins, and a cut in the full-year 2023 outlook.<\/p>\n<p>Returning to the pre-inflation shock level means that Philip Morris stock will have to gain more than 23% from here. While it\u2019s likely that the stock may recover to those levels, we estimate <strong data-ga-track=\"ExternalLink:https:\/\/www.trefis.com\/data\/companies\/PM\/no-login-required\/gc3pUJ2B\/Philip-Morris-PM-Valuation-Is-PM-Stock-Expensive-Or-Cheap-?fromforbesandarticle=trefis230530\">Philip Morris\u2019 valuation<\/strong> to be around $107 per share, about 16% above the market price. This is because the recent uncertainty in the financial sector has made investors concerned about a potential recession. Philip Morris\u2019 business may see an adverse impact on its volume if the U.S. economy were to go into recession, with customers shifting to lesser-priced alternatives.<\/p>\n<p>Our detailed analysis of <strong data-ga-track=\"ExternalLink:https:\/\/www.trefis.com\/data\/companies\/PM\/no-login-required\/e0gfTZZk\/Philip-Morris-During-2008-Recession-vs-2022-Inflation-Shock-PM-Stock-Has-23-Upside-If-It-Recovers-To-Pre-Inflation-Shock-Levels-?fromforbesandarticle=trefis230530\">Philip Morris\u2019 upside post-inflation shock<\/strong> captures trends in the company\u2019s stock during the turbulent market conditions seen over 2022. It compares these trends to the stock\u2019s performance during the 2008 recession.<\/p>\n<p><strong>2022 Inflation Shock<\/strong><\/p>\n<p>Timeline of Inflation Shock So Far:<\/p>\n<p><fbs-ad position=\"inread\" progressive=\"\" ad-id=\"article-0-inread\" aria-hidden=\"true\" role=\"presentation\"><\/fbs-ad><\/p>\n<ul>\n<li>2020 &#8211; early 2021: Increase in money supply to cushion the impact of lockdowns led to high demand for goods; producers unable to match up.<\/li>\n<li>Early 2021: Shipping snarls and worker shortages from the coronavirus pandemic continue to hurt the supply<\/li>\n<li>April 2021: Inflation rates cross 4% and increase rapidly<\/li>\n<li>Early 2022: Energy and food prices spike due to the Russian invasion of Ukraine. Fed begins its rate hike process<\/li>\n<li>June 2022: Inflation levels peak at 9% &#8211; the highest level in 40 years. S&amp;P 500 index declines more than 20% from peak levels.<\/li>\n<li>July &#8211; September 2022: Fed hikes interest rates aggressively &#8211; resulting in an initial recovery in the S&amp;P 500 followed by another sharp decline<\/li>\n<li>Since October 2022: Fed continues rate hike process; improving market sentiments help S&amp;P500 recoup some of its losses.<\/li>\n<\/ul>\n<p>In contrast, here\u2019s how Philip Morris stock and the broader market performed during the 2007\/2008 crisis.<\/p>\n<p><strong>Timeline of 2007-08 Crisis<\/strong><\/p>\n<ul>\n<li>10\/1\/2007: Approximate pre-crisis peak in S&amp;P 500 index<\/li>\n<li>9\/1\/2008 \u2013 10\/1\/2008: Accelerated market decline corresponding to Lehman bankruptcy filing (9\/15\/08)<\/li>\n<li>3\/1\/2009: Approximate bottoming out of S&amp;P 500 index<\/li>\n<li>12\/31\/2009: Initial recovery to levels before accelerated decline (around 9\/1\/2008)<\/li>\n<\/ul>\n<p><strong>Philip Morris and S&amp;P 500 Performance During 2007-08 Crisis<\/strong><\/p>\n<p>PM stock rose from nearly $25 in September 2007 to $55 in August 2008 (pre-crisis peak) and fell sharply to $33 in March 2009 (as the markets bottomed out), implying PM stock lost over 40% of its pre-crisis value. It recovered post the 2008 crisis to levels of around $48 in early 2010, rising roughly 44% between March 2009 and January 2010. The S&amp;P 500 Index saw a decline of 51%, falling from levels of 1,540 in September 2007 to 757 in March 2009. It then rallied 48% between March 2009 and January 2010 to reach levels of 1,124.<\/p>\n<p><strong>Philip Morris Fundamentals Over Recent Years<\/strong><\/p>\n<p>Philip Morris\u2019 revenues rose from $29.8 billion in 2019 to $31.8 billion in 2022. This can be attributed to better price realization and continued growth in heated tobacco units, which more than offset a slight decline in cigarette volume in 2022. Philip Morris\u2019 EPS also increased from $4.61 to $5.82 per share over this period. The earnings growth was driven by higher revenues and a 350 bps operating margin expansion to 36.6% in 2022. Our <strong data-ga-track=\"ExternalLink:https:\/\/www.trefis.com\/data\/companies\/PM\/no-login-required\/cTlkrUXa\/Philip-Morris-PM-Operating-Income-Comparison?fromforbesandarticle=trefis230530\">Philip Morris Operating Income Comparison<\/strong> has more details. Philip Morris acquired Swedish Match, Scandinavia\u2019s largest snus (a moist smokeless tobacco product) manufacturer, in Q4 last year, which will aid future sales growth.<\/p>\n<p><strong>Does Philip Morris Have A Sufficient Cash Cushion To Meet Its Obligations Through The Ongoing Inflation Shock?<\/strong><\/p>\n<p>Philip Morris\u2019 total debt increased from $31.0 billion in 2019 to $43.1 billion in 2022, while its total cash decreased from around $6.9 billion to $3.2 billion over the same period. The company also has long-term investments, which have been between $4 billion and $5 billion. It also garners about $11 billion in cash flows from operations. Given the higher cash flows, the company will likely be able to meet its near term obligations.<\/p>\n<p><strong>Conclusion<\/strong><\/p>\n<p>With the Fed\u2019s efforts to tame runaway inflation rates helping market sentiment, we believe Philip Morris stock has the potential for solid gains once fears of a potential recession are allayed. That said, the pressure on the company\u2019s balance sheet remains a risk factor to realizing these gains. This clubbed with fears of a potential recession and its impact on the cigarette volume means it may take some time for PM stock to reach its pre-inflation shock highs of over $112.<\/p>\n<p>What if you\u2019re looking for a high-performance portfolio with a low downside instead? Here\u2019s a <strong data-ga-track=\"ExternalLink:https:\/\/www.trefis.com\/data\/companies\/PORTFOLIOS\/no-login-required\/BPo8U0Xc\/Reinforced-Value-Portfolio-with-439-Return-Since-2016-vs-87-for-S-P-500?fromforbesandarticle=trefis230530\">reinforced value portfolio<\/strong> that has beaten the market consistently while limiting losses during periods of sharp market declines.<\/p>\n<p>Invest with <strong>Trefis <\/strong><strong data-ga-track=\"ExternalLink:https:\/\/dashboards.trefis.com\/data\/companies\/PORTFOLIOS\/no-login-required\/M7MacZNG?fromforbes\">Market Beating Portfolios<\/strong><\/p>\n<p>See all <strong>Trefis <\/strong><strong data-ga-track=\"ExternalLink:https:\/\/dashboards.trefis.com\/data\/price-estimates?fromforbes\">Price Estimates<\/strong><\/p>\n<\/div>\n<p>Read the full article <a href=\"https:\/\/www.forbes.com\/sites\/greatspeculations\/2023\/05\/30\/does-philip-morris-stock-have-upside-potential-to-its-pre-inflation-peak\/\" target=\"_blank\" rel=\"noopener\">here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Philip Morris stock (NYSE: PM) currently trades at $91 per share, around 19% below its level of $112 on Feb 17, 2022 (pre-inflation shock high), and it seems like a good investment opportunity. Philip Morris saw its stock trading at around $99 at the end of June 2022, just before the Fed started increasing rates, [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":15834,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[241],"tags":[83],"class_list":["post-15833","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-markets","tag-featured"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v20.6 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Does Philip Morris Stock Have Upside Potential To Its Pre-Inflation Peak? | iFintechWorld<\/title>\n<meta name=\"description\" content=\"Philip Morris stock (NYSE: PM) currently trades at $91 per share, around 19% below its level of $112 on Feb 17, 2022 (pre-inflation shock high), and it\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/ifintechworld.com\/?p=15833\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Does Philip Morris Stock Have Upside Potential To Its Pre-Inflation Peak? 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