British American Tobacco Shifts its Business Away from Cigarette

Key Takeaway
British American Tobacco writes down $31.5 billion as it shifts its business away from cigarettes.
Shares of British American Tobacco tumbled Wednesday after the owner of Camel and American Spirit cigarettes took an impairment charge of about $31.5 billion, mainly related to its struggling U.S. cigarette brands with the number of people who smoke in steep decline.

In a financial update, London-based British American Tobacco said it is in the process of transforming its business from traditional, combustible products to “smoke-free” ones. Its goal is to get half its revenue from non-combustibles by 2035. Combustibles currently account for about 83% of its sales, according to the data firm FactSet.

In 2017, British American Tobacco bought Winston-Salem, North Carolina-based Reynolds American Inc. for about $49 billion in cash and stock.

Earlier this year, the Centers for Disease Control and Prevention released a survey that showed U.S. cigarette smoking in another all-time low, with 1 in 9 adults saying they were current smokers. In the mid-1960s, 42% of U.S. adults were smokers.

Technical Analysis
British American Tobacco Industries ( BTI ) 5th Day Moving Average (MA) is 30.71, trading near the bottom of its 52-week range and below its 200-day simple moving average.

BTI stock has a MACD indicator of 0.4, which suggests a buy signal. BTI stock has an RSI of 58, which suggests that the stock is overbought.

Based on these indicators, a possible entry point for BTI stock is when the MACD crosses above the signal line and the RSI is below 70, indicating a bullish momentum and a reasonable price. A possible exit point is when the MACD crosses below the signal line and the RSI is above 70, indicating a bearish momentum and an overbought price.