British American Tobacco p.l.c. (BAT) is ending 2025 in a place few would have predicted two years ago: the share price is near a 52-week high, analysts are turning more positive, and the company is talking confidently about a return to its long-term growth “algorithm” from 2026. At the same time, regulatory pressure, unlicensed vapes and long-running litigation are still hanging over the group.
Here’s a deep dive into the latest news, forecasts and analysis as of 1 December 2025.
Share price: strong recovery and fresh analyst upgrades
After years of being treated as a “value trap”, BAT’s stock has staged a powerful rebound in 2025. In London, the shares recently hit a new 52-week high of about £44.21, outperforming the broader FTSE 100 on 28 November 2025. [1]
In euro terms, BAT was trading around €50 on 28 November, up roughly 40% over 12 months, according to Deutsche Bank’s latest note. [2] That climb reflects a mix of better-than-expected earnings, a more constructive regulatory backdrop in the US, and large buybacks funded partly by asset sales.
Citigroup sees 90%+ upside on US-listed shares
On 29 November 2025, Citigroup reiterated its Buy recommendation on BAT’s US over-the-counter listing (BTAFF). The bank highlighted:
- An average 12-month target price of $58.47 per share
- A target range of $39.59–$71.33
- Implied upside of about 92% versus a recent closing price around $30.41
The note also flagged a projected 22% increase in annual revenue and non-GAAP EPS of 4.49, as well as growing institutional ownership. [3]
Deutsche Bank lifts target after earnings surprise
Deutsche Bank Research has also turned more optimistic. On 28 November 2025 the bank:
- Raised its price target from 4,400p to 4,900p
- Kept its “Buy” rating
- Argued that new products such as e-cigarettes and nicotine pouches, together with a stronger margin profile, should be enough to stabilise earnings in 2026, whereas previously a decline had been expected. [4]
In other words: big-ticket analysts are no longer treating BAT as a slowly shrinking cash cow, but as a tobacco giant that might actually grow again—at least in profit terms—even as cigarette volumes continue to fall.
2025 results: modest growth, but ahead of expectations
BAT’s Half-Year Report for the six months to 30 June 2025 sketched a story of slow, FX-distorted growth that looks better once you strip out currency effects and an unusual Canadian litigation provision. [5]
Key points from H1 2025:
- Revenue:
- Down 2.2% on a reported basis to £12.1bn
- Up 1.8% at constant exchange rates, driven by a return to growth in the US and continued strength in the Americas & Europe (AME) region [6]
- New Categories revenue (vapes, heated tobacco, nicotine pouches):
- Flat at reported rates, but up 2.4% at constant FX to £1.65bn
- “Smokeless” products now 18.2% of Group revenue, up 70 bps vs full-year 2024 [7]
- Profit from operations:
- Reported profit up 19.1% (helped by a favourable update to the Canadian settlement provision and the absence of prior-year impairments)
- Adjusted profit from operations (excluding the Canadian impact) up 1.9% at constant FX [8]
- New Categories margins:
- Contribution margin up 2.8 percentage points to 10.6% at constant FX, a sign that the “smokeless” portfolio is slowly moving towards profitability. [9]
Upgraded 2025 guidance
In June 2025, BAT nudged guidance higher in a pre-close update and then reaffirmed that improved outlook with its half-year results: [10]
- Global tobacco industry volumes expected to be down ~2%
- BAT revenue growth now guided to the top end of 1–2% at constant FX (up from “around 1%”)
- New Categories revenue growth expected at mid-single digits for the full year
- Adjusted profit from operations targeted to grow 1.5–2.5% (excluding Canada), despite a ~1–1.5% FX headwind
- A £1.1bn share buyback for 2025, enlarged thanks to the ITC share sale
Chief executive Tadeu Marroco described H1 performance as “slightly ahead of expectations” and said the group is “firmly on track” to meet full-year guidance in this “deployment year”. [11]
Capital allocation: ITC stake sale, buybacks and bond clean-up
BAT’s 2025 newsflow is dominated not just by earnings but by some heavy financial engineering.
ITC block trade unlocks cash for buybacks
In May 2025, BAT completed the sale of 313 million shares in Indian conglomerate ITC, equivalent to about 2.5% of ITC’s share capital, through an accelerated bookbuild. [12]
- Net proceeds: INR 121bn, roughly £1.05bn at the time
- Use of proceeds: extend BAT’s 2025 share buyback by £200m, taking the programme to £1.1bn
BAT stressed that despite the sale it remains ITC’s largest shareholder, and that the deal is designed to “enhance financial flexibility”, reduce debt and fund its “smokeless” transformation. [13]
Redeeming expensive hybrid debt
On 31 October 2025 the company announced a Substantial Repurchase Event on its €1bn perpetual subordinated fixed-to-reset hybrid securities (non-call 5.25-year). BAT exercised its option to redeem the bonds in full on 10 November 2025 at par plus accrued interest and requested that the listing be cancelled after redemption. [14]
This move fits with BAT’s promise to:
- Continue deleveraging towards 2.0–2.5x adjusted net debt/EBITDA by 2026
- Simplify and gradually lower the cost of its capital structure [15]
In short: BAT is shrinking its equity base with buybacks while also trimming structurally expensive hybrid debt. That’s a classic recipe for higher earnings per share—provided operating profits don’t fall off a cliff.
Leadership and governance: CFO transition and board changes
2025 has also brought notable changes in the upper echelons of BAT’s management.
- On 26 August 2025, BAT announced that Soraya Benchikh, its Chief Financial Officer, would step down as CFO and board director with immediate effect, remaining available to support the transition until the end of the year. [16]
- Javed Iqbal, previously Director of Digital and Information and former interim Finance Director, has been appointed interim CFO while a search for a permanent successor is carried out. [17]
- Earlier, on 14 October 2025, BAT announced that Matthew Wright would join as an independent non-executive director from 1 November 2025 and sit on the Remuneration and Nominations Committees, further refreshing the board. [18]
Management changes always make investors twitchy, but the timing—after a better-than-expected half year and in the midst of a major capital-markets pivot—has so far not undermined market confidence.
New Categories: nicotine pouches lead; vape market gets messy
BAT’s strategic mantra is to build “A Better Tomorrow” by pivoting away from combustibles (traditional cigarettes) towards “smokeless” products: vapes, heated tobacco, and modern oral (nicotine pouches).
Velo pouches powering US turnaround
New Categories revenue is still only about 18% of group sales, but it’s growing faster than cigarettes and is increasingly profitable. [19]
Reuters reports that modern oral products—especially Velo nicotine pouches—have been key to improving BAT’s performance in the US, where sales and profit are expected to return to growth in 2025 for the first time in three years. [20]
Nicotine pouches are particularly attractive financially:
- Gross margins around 75%, compared with roughly 60% for cigarettes, according to prior industry analysis cited in the Financial Times. [21]
If regulators let them live, pouches could end up being the profit engine of BAT’s smokeless future.
Illicit vapes and FDA frustration
The picture is far less tidy in vapes:
- BAT and other major players have seen their legal vape products squeezed by a flood of unregulated disposable vapes, many of them imported and not authorised by the US Food and Drug Administration (FDA). [22]
- BAT expects the global vape market to decline in the “mid-teens” percentage in the first half of 2025, largely because of this chaotic competitive landscape. [23]
In October 2025, BAT paused the pilot launch of its unlicensed disposable vape Vuse One in the US after the FDA warned that selling unapproved nicotine products is unlawful and stepped up enforcement against unauthorised vapes. BAT said it had decided to halt the pilot before the warning but the episode underscores how regulatory friction is shaping strategy. [24]
So BAT is in a weird position: on one side, it is pushing science-backed reduced-risk products and showcasing its harm-reduction research at events like the Global Forum on Nicotine 2025; on the other, its ability to compete with aggressively marketed illicit devices is constrained by the very regulator that’s supposed to be cleaning up the market. [25]
Regulation: menthol reprieve, but pressure hasn’t disappeared
For a tobacco business, regulation is like gravity: you don’t get to ignore it, only adapt.
US menthol ban withdrawn… for now
One of the biggest regulatory clouds hanging over BAT has been the proposed US ban on menthol cigarettes and flavoured cigars. In January 2025, the Trump administration unexpectedly withdrew the FDA’s proposed menthol ban, which had originally been pushed under the Biden administration. [26]
Public-health groups were furious, but from BAT’s perspective the retreat:
- Removes a major near-term threat to US profits, given menthol’s large share of the American cigarette market
- Gives the company breathing room to continue its “smokeless” pivot instead of grappling with an abrupt menthol prohibition
That said, advocacy groups and some states are still pressing for menthol restrictions, and 2025’s “Tobacco Industry Interference Index” highlights industry efforts to delay or weaken rules. [27] Investors can’t treat the menthol issue as permanently resolved; it’s more like a suspended sentence.
BAT’s ESG and climate positioning
On the ESG front, BAT spent much of 2025 trying to convince the world it can be both a tobacco company and a responsible corporate citizen:
- It was named a Financial Times European Climate Leader for the fifth consecutive year, placing it in the top 5% of assessed companies for cutting emissions intensity.
- The Science Based Targets initiative (SBTi) validated BAT’s net-zero targets, including a commitment to eliminate 90% of Scope 1 and 2 emissions and 90% of Scope 3 emissions by 2050. [28]
- BAT also touted a “Triple-A” rating from CDP for climate, water and forests, signalling that at least on environmental disclosure it plays in the top tier. [29]
Critics will rightly point out the paradox here: the company’s core product still kills people, even if it tries to kill the planet a bit less. But from an investor’s perspective, strong ESG credentials can mitigate capital-market risk, especially as some funds bar or penalise high-emission laggards.
Dividends, debt and cash: the income-investor angle
BAT has long been a favourite of dividend hunters. Commentary in the UK financial media routinely highlights how reinvested BAT dividends over decades would have multiplied returns, even before the latest rally. [30]
Key income-and-balance-sheet themes:
- Dividend track record: The company has grown its dividend at an average rate of about 5% per year over the last 15 years and did not cut payouts during COVID-19. [31]
- Deleveraging: BAT reported borrowings including leases of about £35.2bn at mid-2025, with adjusted net debt down 5.1% year-on-year. [32]
- Cash generation: Free cash flow before dividends fell in H1 due to working-capital swings and the Canadian provision, but BAT still targets operating cash-flow conversion above 90% for 2025 and aims to reduce leverage to 2.0–2.5x by 2026. [33]
Between high cash generation, a still-elevated yield (despite share-price gains) and ongoing buybacks, it is not surprising that value-oriented investors and income funds continue to accumulate BAT stock, as reflected in rising institutional ownership data tracked by Fintel. [34]
Key risks heading into 2026
Underneath the positive headlines, BAT is still wrestling with some chunky structural risks:
- Volume decline in combustibles
Global cigarette volumes are expected to fall around 2% in 2025, and that trend is unlikely to reverse. BAT is betting that price/mix and smokeless growth can more than offset this—a bet that works until regulators or consumers say otherwise. [35] - Regulatory shocks
The menthol ban might be on ice, but it hasn’t evaporated. Local flavour bans, new excise regimes (as seen in Bangladesh and Australia) and tighter rules on nicotine pouches or vapes could all hit volumes and margins. [36] - Illicit and unregulated competition
BAT’s frustration with unapproved disposable vapes is not just corporate whining—those products eat market share while facing laxer enforcement, especially online. If regulators crack down too slowly, legal products may be stuck in a high-cost regulatory cage match with cheaper, illicit rivals. [37] - Litigation overhang
BAT is still managing the fallout from a £6.2bn Canadian settlement provision related to long-running health-related lawsuits. While the company has made progress through court-approved plans of compromise, tobacco litigation risk never quite goes away. [38] - Execution risk in New Categories
The smokeless strategy only works if margins keep rising and regulators allow enough flavour variety and innovation to lure smokers away from combustibles. Recent scientific and regulatory debates over flavoured vapes show that this is not guaranteed. [39]
The bottom line: a tobacco giant priced for decline, behaving like a growth stock
As 2025 closes, British American Tobacco is in a strangely liminal space:
- The share price has broken out to a new 52-week high and delivered strong 12-month gains. [40]
- Analysts like Citigroup and Deutsche Bank see meaningful upside and a stabilisation of earnings supported by smokeless growth and margin improvement. [41]
- Capital allocation—ITC stake sales, buybacks, hybrid redemptions and steady dividends—is aggressively shareholder-friendly. [42]
- Yet the business still sells a declining product under intense regulatory and social pressure, in a market distorted by illicit competitors and haunted by legal risk.
For now, markets seem to be betting that BAT can pull off its transformation to a predominantly smokeless business by 2035, while continuing to shower shareholders with cash along the way. [43]
Whether that bet pays off will depend less on the next quarterly print and more on three slow-burn variables: regulation, science and consumer behaviour—the trio that ultimately decides how many people still light up, how many switch, and how many quit altogether.
References
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