Last Update 04 Jan 26

Fair value Decreased 2.69%

PM: Recent Share Pullback Will Offer Appealing Long-Term Entry Opportunity

Analysts have modestly lowered their price target on Philip Morris International from $220.00 to about $214.07 per share, citing slightly softer long term revenue growth and profit margin assumptions. They also view the recent pullback, following guidance tweaks and near term U.S. ZYN headwinds, as an attractive buying opportunity.

Analyst Commentary

Bullish analysts argue that the recent weakness in Philip Morris shares is disconnected from the company’s underlying performance, pointing to solid Q3 organic sales growth, improved profit margins, and continued EPS expansion. They contend that modestly lower long term guidance reflects prudent assumptions rather than a material deterioration in fundamentals.

While U.S. ZYN dynamics and a slightly weaker Q4 operating profit outlook have pressured sentiment, bullish analysts view these issues as largely short term and already reflected in the share price. They emphasize that the core international business, pricing power, and reduced risk product portfolio remain intact drivers of cash flow and earnings visibility.

In their view, the current valuation discount versus historical averages and global consumer staples peers is unwarranted, especially given the company’s track record of execution and shareholder returns. This gap between fundamentals and market reaction is seen as creating a favorable entry point for long term investors.

Bullish Takeaways

Bullish analysts see the share price pullback as an overreaction relative to resilient Q3 results and improving profit margins, creating an appealing risk reward profile.
They argue that the stock now trades at an unjustified discount to both its historical multiples and high quality global staples peers, despite comparable or better earnings visibility.
Short term pressures from U.S. ZYN and slightly softer near term profit guidance are viewed as transitory, with limited impact on the long term growth algorithm and cash generation.
The combination of steady EPS growth, strong free cash flow, and ongoing capital returns is cited as a key catalyst for multiple re-rating and potential upside to current price targets.

What's in the News

Philip Morris International reaffirmed its 2025 reported diluted EPS forecast of $7.39 to $7.49, signaling confidence in its financial outlook despite recent market volatility (Key Developments).
The company previously issued 2025 guidance calling for diluted EPS of $7.39 to $7.49, organic net revenue growth of around 6% to 8%, and organic operating income growth of 10% to 11.5%, even after higher U.S. investments (Key Developments).
Philip Morris International presented evidence to the U.S. Tobacco Products Scientific Advisory Committee as part of the FDA’s review to renew the modified risk tobacco product status of its IQOS heated tobacco system and related HEETS consumables in the U.S., a key step for continued commercialization and the potential rollout of IQOS ILUMA (Key Developments).
Ferrari S.p.A. renewed and strengthened its multi year partnership with Philip Morris International, which will become a Premium Partner of Scuderia Ferrari HP and a Series Partner of the Ferrari Challenge Trofeo Pirelli starting January 1, 2026, extending a collaboration spanning more than 50 years (Key Developments).

Valuation Changes

Fair Value: Lowered slightly from $220.00 to approximately $214.07 per share, reflecting modestly more conservative long term assumptions.
Discount Rate: Increased marginally from 7.79% to about 7.81%, implying a slightly higher required return profile.
Revenue Growth: Reduced meaningfully from roughly 10.9% to about 9.2%, indicating a more tempered view of long term top line expansion.
Net Profit Margin: Trimmed slightly from around 29.4% to about 28.7%, incorporating a modestly lower profitability outlook.
Future P/E: Raised modestly from about 27.4x to roughly 28.1x, suggesting a slightly higher multiple applied to forward earnings despite softer growth inputs.

Aggressive growth in ZYN and smoke-free products, alongside rapid emerging market expansion, is poised to unlock sustained revenue and market share gains beyond expectations.
Broadening into wellness, healthcare, and digital platforms diversifies revenue streams and customer engagement, supporting long-term margin expansion and industry leadership.
Regulatory challenges, declining cigarette volumes, uncertain growth in smoke-free products, rising illicit trade, and ESG pressures collectively threaten future profitability and shareholder returns.

Catalysts

About Philip Morris International

Operates as a tobacco company.What are the underlying business or industry changes driving this perspective?

While analyst consensus expects strong ZYN growth in the U.S., this likely understates future acceleration, as recent removal of supply constraints, expanded production capacity, and a renewed, aggressive marketing push are positioned to convert millions of new legal-age users, potentially driving ZYN revenue and market share growth well beyond expectations.
Analyst consensus expects that international IQOS and smoke-free products will sustain double-digit organic growth, but this likely underappreciates the opportunity: PMI's accelerating momentum in emerging markets like Asia, MENA, and Latin America, coupled with rapid urbanization and rising disposable incomes in these regions, could unlock a multi-year runway for high-teens organic revenue and operating income growth as these products gain mass adoption.
PMI's multi-category expansion beyond tobacco-including nicotine pouches and e-vapor globally, plus early-stage wellness and healthcare products supported by substantial R&D investment-creates an overlooked pipeline of new, high-margin revenue streams, laying the groundwork for long-term net income and margin expansion as the global consumer base diversifies.
PMI's advanced direct-to-consumer digital platforms and personalized, data-driven marketing initiatives are set to meaningfully increase customer lifetime value, drive loyalty, and enhance pricing power, supporting sustainable improvements to operating margins and cash flow.
With a strong balance sheet, leading supply chain, and global footprint, PMI is uniquely positioned to execute value-accretive M&A and capitalize on industry consolidation, allowing for long-term EBITDA and earnings growth as regulatory and market complexities drive smaller competitors out.

Philip Morris International Earnings and Revenue Growth

Philip Morris International Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

This narrative explores a more optimistic perspective on Philip Morris International compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
The bullish analysts are assuming Philip Morris International's revenue will grow by 10.9% annually over the next 3 years.
The bullish analysts assume that profit margins will increase from 21.0% today to 29.4% in 3 years time.
The bullish analysts expect earnings to reach $15.7 billion (and earnings per share of $10.02) by about September 2028, up from $8.2 billion today. The analysts are largely in agreement about this estimate.
In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 27.4x on those 2028 earnings, down from 31.2x today. This future PE is lower than the current PE for the GB Tobacco industry at 33.8x.
Analysts expect the number of shares outstanding to grow by 0.11% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 7.79%, as per the Simply Wall St company report.

Philip Morris International Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Growing regulatory risks-including expanded advertising bans, flavor restrictions like those recently experienced in the EU, and pending tax directives-threaten PMI's ability to grow market share and may lead to higher regulatory costs, negatively impacting both revenue growth and net income.
Persistent structural declines in global cigarette volumes, as acknowledged by management with expected low-single-digit annual decreases and ongoing volume contractions in key markets, continue to erode PMI's core combustible revenue base over the long term.
The company's transition to reduced-risk products is still uncertain; while smoke-free sales are growing rapidly, these categories face significant R&D, marketing, and promotional expenses. If growth in smoke-free slows or does not offset declining combustibles, net margins and earnings could come under sustained pressure.
Increasing prevalence of illicit trade, especially highlighted in the EU where illicit consumption rose to over 9 percent of total cigarette usage, undermines legal market volumes and deprives PMI of legitimate sales, posing an ongoing risk to overall revenue and profit growth.
Shifts in societal attitudes, ESG pressure, and institutional investor divestment may gradually increase PMI's cost of capital and reduce investor demand for shares, which could have a dampening effect on equity valuation and total shareholder return over time.

Valuation

How have all the factors above been brought together to estimate a fair value?

The assumed bullish price target for Philip Morris International is $220.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Philip Morris International's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $220.0, and the most bearish reporting a price target of just $153.0.
In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $53.2 billion, earnings will come to $15.7 billion, and it would be trading on a PE ratio of 27.4x, assuming you use a discount rate of 7.8%.
Given the current share price of $164.74, the bullish analyst price target of $220.0 is 25.1% higher.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystHighTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystHighTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystHighTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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