Philip Morris (NYSE:PM) shares tanked by nearly 3% in the premarket session today after the Marlboro cigarette maker halted online sales of its nicotine pouch brand, Zyn.
The Subpoena
The sales halt comes after the company received a subpoena in the District of Columbia (DC), where sales of flavored nicotine products are banned. A preliminary investigation by Philip Morris revealed that sales of flavored nicotine pouch products occurred in DC, primarily through certain online sales platforms and some retailers.
Importantly, the company noted the possibility of significant liability if the regulatory proceedings result in an unfavorable outcome.
And Its Wider Implications
Furthermore, PM’s affiliate involved in the development, Swedish Match North America, plans to undertake a complete review of its sales and supply chain in areas where bans on flavored nicotine products may apply.
A key risk for Philip Morris is that the regulatory action could extend beyond DC. According to Bloomberg, varying flavor bans and restrictions are in place across five states and 400 localities in the U.S.
Tobacco companies across the board are gradually moving toward a smoke-free future. PM’s Zyn does not contain any tobacco, delivering nicotine to users via pouches placed in the mouth. The popularity of the product has resulted in supply shortages in recent times. Still, online sales contribute a small percentage of Zyn’s overall volumes in the U.S.
Is PM Stock a Buy, Sell, or Hold?
Today’s price decline comes after a nearly 13.7% rise in the company’s share price over the past year. Overall, the Street has a Moderate Buy consensus rating on Philip Morris, alongside an average PM price target of $107.63.
Read full Disclosure
