CFDs are complex instruments. You can lose your money rapidly due to leverage. Please ensure you understand how this product works and whether you can afford to take the high risk of losing money. CFDs are complex instruments. You can lose your money rapidly due to leverage. Please ensure you understand how this product works and whether you can afford to take the high risk of losing money.

Jefferies believe BAT stock could soar to £48 per share

British American Tobacco will release a trading update on Tuesday, with the stock capable of hitting £48 per share, according to analysts at Jefferies.

British American Tobacco (BAT) has steadily clawed back the losses it sustained at the hands of the Covid-19 crisis, with the stock trading 4% higher year-to-date – outperforming the broader market with the FTSE 100 down 14% over the same period.

But the company’s share price rally is not over, according to analysts at Jefferies, with the US-based investment bank reiterating its ‘buy’ rating and issuing a target price of £48 per share in June.

Based on BAT trading at £31.44 at the time of publication, analysts at Jefferies believe the stock has a potential upside of 52% - making it potentially one of the stand out performers on the blue-chip index.

BAT will unveil a trading update on Tuesday 9 June, with investors eager for an update on the company’s performance.

BAT: technical analysis

British American Tobacco continues to climb in a steady fashion, building on its gains over the past five weeks, according to Chris Beauchamp, chief market analyst at IG.

‘The share price dropped by a third in February and March, giving back almost all its gains made since late January 2019 in the space of a month, before finding support at £23.14,’ Beauchamp said. ‘From there it has staged an impressive rebound, moving back above the 200-day SMA (currently £29.56) and rallying from there to hit £33 by the end of May.’

‘The price has held rising trendline support from the late April support zone around £28.70, and has established a higher low at £31.50,’ he said. ‘Further gains target the high from late May at £33, before moving on to the £34.29 peak from January and February.’

‘A more bearish view in the short-term requires the price to drop below £31, and then this may bring the £28.70 support zone into view once again,’ he added.

BAT 2020 outlook remains strong

Despite the myriad of macroeconomic headwinds, BAT published a promising outlook for the year, with the company confirming high single figure earnings per share growth and a 65% dividend pay-out policy.

The company admitted that the impact of Covid-19 is difficult to predict, with the tobacco producer anticipating a reduction in trade and consumer stocks and some effect on industry volume and revenue growth in its second quarter.

‘Overall, and considering the challenging environment, our business is resilient, competitive and performing well, and we are confident in delivering another good year of adjusted diluted high single figure EPS growth in constant currency,’ the company said.

How much does it cost to buy UK share with IG?

There are two ways to ‘buy’ UK shares with IG: trading CFDs or buying physical shares. The cost will depend on which method you choose. The table below illustrates how the costs to get exposure to £10,000 of Lloyds stock, which is equivalent to 16,000 shares (quoted at 62.5p a share).

Remember, CFDs are derivatives, which come with higher risk and reward than investing.

Cost to get exposure to Lloyds stock

CFD trading
Action Buy 16,000 share CFDs
Capital required to open £2000
Total fees £20.88

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This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

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