BAT’s Pre-Update Slide Puts Bullish Analyst Calls to the Test

British American Tobacco’s share price has taken a sharp turn lower ahead of a pivotal trading update, shedding more than 6% in the past week alone. On Friday, the stock closed at €52.66 on the Frankfurt listing, a pullback that has split opinion among technicians even as several major investment banks double down on their buy ratings.

The sell-off has produced a rare divergence in technical readings. On the London-listed shares, the short-term relative strength index has tumbled to around 26, firmly in oversold territory. But on a longer time frame, the picture flips completely: the RSI sits at 98.3, an extreme overbought reading that suggests the recent decline is merely a correction within a powerful uptrend. The stock still stands roughly 2.5% above its 50-day moving average and nearly 7.4% above the 200-day line. It is about 7.9% off the 52-week high of 57.18 euros set in mid-May. Analysts watching the London listing see initial support around 4,351 pence and 4,312 pence, with any bounce likely to face resistance near 4,773 pence.

Muted in the short-term noise is a flurry of fresh analyst upgrades. Barclays last week raised its price target from 4,900 pence to 5,400 pence, reiterating an “overweight” stance on expectations of positive surprises in the first half and achievable full-year goals. UBS went a step further, reaffirming a buy with a target of 5,750 pence — roughly 25% above the current price. Yet the consensus among six analysts sits at just 4,708 pence, reflecting a spread of more than 2,300 pence between the most bullish and bearish forecasts. Jefferies had already joined the bullish camp in mid-April with a 5,200-pence target.

Should investors sell immediately? Or is it worth buying British American Tobacco?

The real stress test comes on Tuesday, 2 June, when BAT releases its pre-close trading update for the first half at 7 a.m. BST. CEO Tadeu Marroco will lead the investor call, alongside interim CFO Javed Iqbal and head of investor relations Victoria Buxton. The market will be watching for updates on the group’s ability to hold pricing power in traditional tobacco and for signs that the “new categories” — vaping and heated tobacco — are gaining enough traction to offset volume declines. Another critical metric is net debt: investors want to see it move back toward the target range of 2.0 to 2.5 times operating cash flow.

For income-focused shareholders, the 5.3% dividend yield remains a key argument for holding the stock. But that payout depends on cash generation, which the update will clarify. Derren Nathan, head of analysis at Hargreaves Lansdown, noted that BAT entered the year guiding toward the lower end of its medium-term targets — 3–5% revenue growth and 4–6% operating profit growth — making Tuesday’s numbers a make-or-break moment for both the optimists at UBS and the cautious mood that has gripped the market over the past week.

Despite the recent drop, the stock is still up more than 7% over the past month, roughly 9% since the start of the year, and a hefty 33% over the past twelve months. Tuesday’s update will either validate the long-term bull case or vindicate the sellers who have driven this week’s slide.

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British American Tobacco Stock: New Analysis - 31 May

Fresh British American Tobacco information released. What's the impact for investors? Our latest independent report examines recent figures and market trends.

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