Is Altria Group, Inc. (NYSE:MO) Currently Priced 41% Below Its Value?
Written by Emily J. Thompson, Senior Investment Analyst
Updated: Aug 31 2025
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Source: Yahoo Finance
Altria Group Valuation Analysis
- Fair Value Estimate: Altria Group's fair value is estimated at US$114, indicating a significant undervaluation of 41% compared to its current share price of US$67.21.
- Analyst Price Target: The average analyst price target for Altria is US$62.88, which is 45% lower than the fair value estimate.
Discounted Cash Flow (DCF) Model
- Methodology: The analysis employs a two-stage DCF model, which accounts for an initial high growth phase followed by a steady growth period. Future cash flows are estimated and discounted to present value.
- Projected Cash Flows: Expected levered free cash flows (FCF) from 2026 to 2035 are projected to grow from US$8.97 billion to US$11.5 billion, with growth rates gradually increasing from 1.70% to 2.85%.
- Present Value Calculation: The present value of the 10-year cash flows totals approximately US$69 billion, discounted at a rate of 7.7%.
Terminal Value and Total Equity Value
- Terminal Value Calculation: The terminal value is calculated at US$256 billion, using a conservative growth rate of 3.1% based on the 5-year average of the 10-year government bond yield.
- Total Equity Value: The total equity value, combining the present value of cash flows and terminal value, is estimated at US$191 billion, leading to a per-share valuation that suggests the stock is undervalued.
Financial Strengths and Weaknesses
- Strengths: Altria's earnings and cash flows adequately cover its debt and dividends, placing it in the top 25% of dividend payers in the market.
- Weaknesses: The company has experienced a decline in earnings over the past year, and total liabilities exceed total assets, raising financial distress concerns.
Future Outlook and Risks
- Growth Forecast: Annual earnings are expected to grow over the next three years, although at a slower rate compared to the broader American market.
- Investment Considerations: The analysis emphasizes that valuation is just one aspect of investment decisions, and potential investors should consider risks, future earnings growth, and alternative investment opportunities.
Conclusion
- Valuation Limitations: The DCF model is not foolproof and should be used to test assumptions rather than provide definitive valuations. Changes in growth rates or cost of equity can significantly alter outcomes.
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Analyst Views on MO
Wall Street analysts forecast MO stock price to rise over the next 12 months. According to Wall Street analysts, the average 1-year price target for MO is 65.60 USD with a low forecast of 57.00 USD and a high forecast of 72.00 USD. However, analyst price targets are subjective and often lag stock prices, so investors should focus on the objective reasons behind analyst rating changes, which better reflect the company's fundamentals.
6 Analyst Rating
4 Buy
1 Hold
1 Sell
Moderate Buy
Current: 63.130
Low
57.00
Averages
65.60
High
72.00
Current: 63.130
Low
57.00
Averages
65.60
High
72.00
About MO
Altria Group, Inc. operates a portfolio of tobacco products for United States tobacco consumers aged 21+. Its segments include smokeable products and oral tobacco products. The smokeable products segment consists of combustible cigarettes and machine-made large cigars. The oral tobacco products segment includes moist smokeless tobacco (MST) products and oral nicotine pouches. Its wholly owned subsidiaries include manufacturers of both combustible and smoke-free products. In combustibles, it owns Philip Morris USA Inc. (PM USA), and John Middleton Co. (Middleton), which are cigarette manufacturers. Its smoke-free portfolio includes ownership of U.S. Smokeless Tobacco Company LLC (USSTC), a global MST manufacturer, Helix Innovations LLC (Helix), a manufacturer of oral nicotine pouches, and NJOY, LLC (NJOY), an e-vapor manufacturer with a commercialized product portfolio. The brand portfolios of its operating companies include Marlboro, Black & Mild, Copenhagen, Skoal, on! and NJOY.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
ALTRIA STOCK FALLS 1.3% FOLLOWING Q4 EPS DISAPPOINTMENT
Austrian Economic Performance: Austria's economy has experienced a downturn, with a reported decline of 1.3% following the fourth quarter.
Earnings Per Share (EPS) Miss: The decline in economic performance coincides with a miss in earnings per share (EPS) expectations for the quarter.
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Altria Group Faces Alarming Market Share Losses
- Market Share Decline: Altria Group's domestic cigarette shipment volumes fell by 7.9% in Q4, indicating a continued decline in smoking rates in the U.S., which puts pressure on its profitability.
- Marlboro Brand Struggles: Altria's Marlboro brand saw its retail market share drop to 39.8%, a year-over-year decline of 1.5 percentage points, reflecting weakened brand competitiveness.
- Oral Tobacco Product Setbacks: Despite rising demand for oral tobacco products, Altria's shipment volumes fell by 6.3%, with its share in the fast-growing nicotine pouch market declining by 5.3 percentage points to 13.4%, indicating competitive challenges.
- Stable Profits: Although shipment volumes decreased, Altria's net revenues declined by less than 1% to $5.1 billion, largely due to price hikes offsetting lower volumes, with management projecting adjusted earnings growth of 2.5% to 5.5% in 2026.
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