British American Tobacco Industries PLC (LON:BATS) is a consumer defensive stock fit for investment during the declining phase of the economic cycle. Being a consumer defensive stock means that the products and services offered by the business will remain in demand regardless of the economic conditions.
BAT is consumer defensive because consumers cannot stop smoking their cigarette sticks just because the economy is declining or the inflation is high. Instead, consumers are more likely to shift consumption from other products just to satisfy the need for a smoke.
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BAT stock will be among the few whose market valuation will remain highly defiant in a declining economy. The company’s guidance from a few days back pointed to mid-digit revenue growth and EPS. The only challenge to the growth is the crisis in Russia, as the company announced halting all investments in the country.
BAT is also in the process of transferring the Russian operations, with the outcome expected to be favorable. We consider that all this news has been absorbed by the market valuation and investors should have a more optimistic outlook.
BAT stock pivoting at $38.98 to begin a price rally
The share price pivoted at the MA 200 valuation of 38.97 to mark the start of a bullish pattern for the stock. The RSI is turning upwards after hitting 50 within the week. The MACD signal and the histogram indicate a bullish trend.
Our analysis projects that British American Tobacco will move to regain the valuation of about $60 in the foreseeable future. To get there, the stock will have to break through two resistance levels at $46 and $54.
We consider that the patient investor would make a significant return by holding the stock while trying to ride the chart to the levels.
Summary
British American Tobacco is a consumer defensive stock that will continue attracting demand despite the economic challenges. The stock is pivoting at the price MA 200 valuation of $39. We project the stock to gain in phases to $46, then $54 before hitting $60.
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