JPMorgan Reboots BAT Coverage as Buyback and Kenyan Bill Test the Growth Story

JPMorgan has reinstated its coverage of British American Tobacco with an "Overweight" rating and a price target of 5,300 pence, betting that share gains in nicotine pouches and the U.S. e-cigarette market can pull the tobacco giant back to solid top-line growth. The stock traded up 1.7% at €54.38 on the day, though the target is quoted in pence and so refers to a different listing currency.

The U.S. bank's core call is that BAT can return to currency-neutral revenue growth of 3% to 5%. Underpinning that forecast are market-share advances in two product lines — Velo nicotine pouches in the U.S. and the company's American e-cigarette business — which JPMorgan sees as the engine for a broader sales recovery.

Alongside the analyst note, BAT disclosed the repurchase of 587,484 ordinary shares from the prior week, purchases spread across several trading sessions. The company said the shares are earmarked for cancellation, a move that would shrink the total share count.

For investors, the two announcements pose a single question: can operating momentum give lasting support to the capital returns? The buyback is a tangible piece of that calculus, but it only carries weight as a long-term investment argument if the business itself delivers. The focus therefore belongs beyond the number of shares bought back — on the growth prospects and the conditions under which they can be reached.

That is where the JPMorgan assessment becomes the key yardstick. The bullish case rests on Velo extending its U.S. pouch share gains while the American vaping business keeps expanding, together lifting revenue growth back toward the forecast range. If those drivers translate into a wider sales improvement, capital returns and operating progress could reinforce each other. Should the business disappoint, the investment thesis would have to lean far more heavily on the buyback — making execution of the growth plan the decisive test.

A favorable scenario would see both engines firing: Velo holding its U.S. momentum and e-cigarettes continuing to grow, strengthening the economic foundation for the repurchases. Cancelling the acquired stock would reduce the share base while operating growth pushes the business forward. The bull case, in other words, depends on progress on both fronts rather than on the buyback program alone.

Crucially, the U.S. story would need enough weight to offset pressure in other markets. That is a scenario, not a certainty. It hinges on how durable those share gains prove and how regulation of the products evolves.

A Kenyan Bill Shows How Real the Regulatory Risk Is

A legislative proposal in Kenya, reported on Sunday by Business Daily, illustrates how concrete such risks can become. The bill would ban the manufacture, sale, use, advertising and distribution of nicotine pouches and shisha, among other measures. It is awaiting committee review and is not yet law.

The proposal threatens BAT Kenya's Velo business, where the medium-term goal is to generate a fifth of annual revenue from nicotine pouches. Were the ban passed in its described form, that growth ambition would come under considerable strain. Both the potential scope of the intervention and its procedural stage therefore matter to the investment case; the bear scenario would sharpen if the parliamentary review confirms the sweeping prohibition.

Conversely, an outcome that allows the business to continue would speak in BAT's favor. Kenya lays bare how heavily the prospects of individual growth markets can depend on political decisions.

What to Watch Next

As long as the U.S. growth drivers hold and regulatory interventions do not materially curb expansion, the buybacks can complement the investment outlook. If that balance tips — through weaker growth or far-reaching bans — the operating expectation would need to be weighted more cautiously. The upcoming committee review of the Kenyan bill is the next concrete catalyst: if the broad prohibition stands, the risk to the local Velo ambition rises; if it is watered down, the outlook for that business could improve. The repurchases gain conviction above all when growth holds up even under regulatory pressure.