Morgan Stanley double-upgraded British American Tobacco (LON: BATS) to Overweight from Underweight on Friday, naming the tobacco giant its top pick in European tobacco.
The bank also raised its price target for the stock to 4,900p from 3,050p, implying further upside from Friday’s closing price of 4,302p per share.
The double upgrade reflects a substantial shift in Morgan Stanley’s view on the company. The firm cited tobacco’s defensive characteristics and superior cash generation as reasons to be constructive on the sector, while flagging improving fundamentals specific to British American Tobacco as it expands into new product categories beyond traditional cigarettes.
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The call adds to a previous bullish sentiment around the stock. In January, UBS reiterated a Buy rating, citing an improved innovation pipeline in new categories and strengthening US market conditions.
The UBS analysts highlighted the company’s Velo nicotine pouch brand as capturing close to 70% of category growth in the US while also raising prices, alongside double-digit growth in U.S. vapor sales.
British American Tobacco shares have held up reasonably well in 2026, rising 3.2% year to date and 34.9% over the past 12 months.
The current analyst consensus is positive on the stock, with 10 assigning it a Buy rating, three a Hold rating and one a Sell, according to TradingView. The consensus price target is 4,804p per share, suggesting potential upside of over 11%.
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