British American Tobacco Shares (LON:BATS) Hit Multi-Year High – Analysts See Upside

British American Tobacco shares (LON:BATS) have capped off another impressive week, reaching a new multi-year high of 3,788p on the LSE. The impressive gain of 6.45% on the week delivered a firm break of 3,650p, and saw BATS break out to levels not seen in seven years.

Several catalysts have contributed to this bullish momentum. A key driver was a recent analyst upgrade from Jefferies last week which initiated coverage on the global tobacco sector with a positive outlook, naming BATS as their top pick. This came with a hefty 4,800p price target, indicating a perceived upside of more than 25% from current levels.

Having already added 27% since the start of this year, and 51.9% over the past 12 months, sentiment has been firmly bullish.

Barclays are another firm to have put their backing behind BATS, with a price target raise from 3,750 to 4,100p coming just last month. The expectation that nicotine pouches will hit $100B in sales by 2035, up from $8B last year was the primary driver of the move higher.

BAT's ability to offset declines in traditional cigarette sales through pricing strategies and operational efficiencies has been a key factor in its recent success. Furthermore, its strategic focus on reduced-risk products positions it to capitalize on the growing demand for smoke-free alternatives.

As the tobacco industry undergoes a significant transformation, BATS appears to be well-positioned to adapt and thrive.

However, it's important to acknowledge the challenges and risks facing BATS. The tobacco industry is subject to stringent regulations and increasing health concerns, which could impact future sales and profitability.

The company's ability to navigate these regulatory hurdles and effectively manage its product portfolio will be crucial for maintaining investor confidence. Moreover, the premium valuation of the stock raises questions about its long-term sustainability.

While analysts continue to see upside potential, any significant setbacks in the company's performance or changes in market sentiment could trigger a correction.