Interactive Investor

eyeQ: this tobacco stock could damage your wealth

interactive investor has teamed up with the experts at eyeQ who use artificial intelligence and their own smart machine to generate actionable trading signals. Here’s what it says about this FTSE 100 income play.

1st February 2024 10:49

Huw Roberts from eyeQ

"Our signals are crafted through macro-valuation, trend analysis, and meticulous back-testing. This combination ensures a comprehensive evaluation of an asset's value, market conditions, and historical performance." eyeQ

Imperial Brands

  • Trading signal: strategic long-term
  • Model value: 1,834.2p
  • Fair Value Gap (premium/discount to Model Value): +6.1%
  • Model relevance: 79% 

Data correct as at 26 January 2024. Please click glossary for explanation of terms.

Given the state of the UK economy, Imperial Brands (LSE:IMB) screens as rich (current share price above our Model Value) on the eyeQ smart machine.

UK tobacco company Imperial Brands (think John Player, Lambert & Butler cigarettes) is up over 7% so far in 2024. For context, the FTSE 100 is down 1.3% in the first few weeks of the new year.

An impressive performance, but there's a potential red flag.

eyeQ identifies IMB as rich in current macro conditions, indicating the rally lacks broader economic justification. It now sits 6.1% above model fair value - where the stock "should" trade given UK growth, inflation, what the Bank of England is doing with interest rates, how strong the pound is and more.

That’s near the upper end of recent valuations.

At a minimum, these are not great levels to be buying Imperial Brands. And, for the more active investors, if you have IMB in your portfolio, these are attractive levels to maybe book a little profit and seek alternative investment ideas.

These third-party research articles are provided by eyeQ (Quant Insight). interactive investor does not make any representation as to the completeness, accuracy or timeliness of the information provided, nor do we accept any liability for any losses, costs, liabilities or expenses that may arise directly or indirectly from your use of, or reliance on, the information (except where we have acted negligently, fraudulently or in wilful default in relation to the production or distribution of the information).

The value of your investments may go down as well as up. You may not get back all the money that you invest.

Equity research is provided for information purposes only. Neither eyeQ (Quant Insight) nor interactive investor have considered your personal circumstances, and the information provided should not be considered a personal recommendation. If you are in any doubt as to the action you should take, please consult an authorised financial adviser. 

Disclosure

We use a combination of fundamental and technical analysis in forming our view as to the valuation and prospects of an investment. Where relevant we have set out those particular matters we think are important in the above article, but further detail can be found here.

Please note that our article on this investment should not be considered to be a regular publication.

Details of all recommendations issued by ii during the previous 12-month period can be found here.

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In addition, individuals involved in the production of investment articles are subject to a personal account dealing restriction, which prevents them from placing a transaction in the specified instrument(s) for a period before and for five working days after such publication. This is to avoid personal interests conflicting with the interests of the recipients of those investment articles.