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Tobacco Stocks Rebound As Trump Says 'We Have To Do Something On Vaping'

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Tobacco Stocks Rebound As Trump Says 'We Have To Do Something On Vaping'
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Tobacco stocks were resilient on Wednesday after a series of negative headlines about the potential dangers of vaping and indications from President Donald Trump that a regulatory crackdown may be on the horizon.

Vaping Crackdown

On Wednesday morning, U.S. health secretary Alex Azar told reporters he had just met with Trump to discuss implementing a new set of guidelines for e-cigarettes and potential enforcement actions against companies targeting children with vaping products.

The Centers for Disease Control and Prevention are currently investigating more than 450 cases of lung disease and six deaths in the U.S. that are suspected to be tied to vaping.

“We have a problem in our country...and it’s called vaping,” Trump said. “Especially vaping as it pertains to innocent children.”

Azar said one of the potential goals of new regulations would be to remove all flavored e-cigarettes from the market other than tobacco-flavor. He said the process of ironing out the new guidelines could take several weeks but could potentially be implemented within just 30 days.

Vaping Illnesses

The potential regulatory crackdown comes after the Southern Nevada Health District reported it has its first case of severe respiratory illness in a minor that is confirmed to be linked to e-cigarettes.

The potential federal ban on flavored e-cigarettes comes after Michigan banned most flavors last week. San Francisco previously banned e-cigarettes all together back in June due to health concerns for young users.

Also on Wednesday morning, the Wall Street Journal reported e-cigarette producer JUUL is not restricting its flavor lineup in international markets the same way it does in the U.S. JUUL has reportedly removed sweet and fruity flavors from shelves in the U.S. due to concerns about underage vaping. In addition, JUUL reportedly supports legislation to raise the minimum buying age for e-cigarettes and sells only to customers at least 21 years old on its website.

Despite the seeming concern for American youth, JUUL is reportedly launching its full flavor lineup in China and selling online to customers aged 18 and above. JUUL launched its China sales just this week. A JUUL spokesperson says the company assesses and approaches each country differently based on local laws and culture.

Investors Shrug Off News

After an initial dip following the Trump headlines, tobacco stocks recovered to trade mostly higher on Wednesday, and Bank of America cannabis analyst Christopher Carey said investors shouldn’t be too quick to rush to conclusions about the recent illnesses.

“Health officials have clearly noted that this cluster of cases is a new problem, not an ongoing one found in those who vape (e-cigs/vapes have been available for sale for years),” Carey said Wednesday.

“US Health officials found that many of the ill patients purchased black-market vape products, leading to the Centers for Disease Control and Prevention (CDC) and Food & Drug Administration to urge consumers to stop buying products off “the street” and/or modifying devices to vape adulterated substances.”

Here’s a look at how major tobacco and cannabis stocks were trading on Wednesday:

  • Altria Group Inc (NYSE: MO) was up 0.4%.
  • Philip Morris International Inc. (NYSE: PM) was up 0.7%.
  • British American Tobacco PLC (NYSE: BTI) was up 2%.
  • Canopy Growth Corp (NYSE: CGC) was down 0.2%.
  • Aurora Cannabis Inc (NYSE: ACB) was up 2.3%.

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Latest Ratings for MO

DateFirmActionFromTo
Sep 2019DowngradesOverweightNeutral
Aug 2019UpgradesUnderweightEqual-Weight
Aug 2019MaintainsUnderweight

View More Analyst Ratings for MO
View the Latest Analyst Ratings

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