Philip Morris Should Lead in Reduced Risk-Products in Addition to Its Dominance in Combustion

Philip Morris International is the world’s largest tobacco company by volume, with cigarette sales to roughly 170 countries. Despite such dominance, its goal is to completely replace its cigarette sales with reduced-risk alternatives. As of 2024, roughly 40% of revenue came from smoke-free products; the aim is two-thirds of revenue by 2030. This looks lofty to us; we forecast PMI will reach roughly 50% by 2029. This does not reflect our expectation for underperformance in reduced-risk, but rather the steady and sizable contributions from combustible tobacco products.