JPMorgan set a price target of 5,300 pence on British American Tobacco's London-listed shares and reinstated coverage at Overweight on Tuesday, upgrading the stock from the firm's previous Neutral stance.

The call matters for portfolio managers because it reframes BTI as a growth holding rather than a defensive one. Analyst Edward Hockin characterizes the company as an earnings-per-share compounder, arguing that market-share gains in nicotine pouches and U.S. vaping products could return British American Tobacco to sales growth of 3% to 5% at constant currency. For practitioners, the upgrade turns BTI from a stock you hold for yield into one JPMorgan expects to compound — a shift that typically draws in buyers who had screened the name out on stagnating revenue.

What backs the analyst's case?

The numbers sit in the smokeless portfolio, where the U.S. volume share of the Velo nicotine-pouch brand climbed from 4.4% in January 2024 to more than 30%. That trajectory, from a single-digit sliver to roughly a third of the segment in under two years, is the concrete comparison underpinning the rating. British American Tobacco also sells Vuse vaping products alongside cigarette brands including Lucky Strike and Newport, giving it multiple routes into the U.S. nicotine market as consumers shift away from cigarettes.

Management has guided toward adjusted earnings-per-share growth of 5% to 8% over the next several years. The company has also planned £1.3 billion of share buybacks for 2026, which mechanically supports the per-share compounding thesis JPMorgan lays out.

How does the combustible business fit in?

Not by growing. British American Tobacco expects global volumes of combustible products to decline by about 2.5% a year through 2030. Management counts on price increases and a richer product mix to keep revenue rising over that period — the classic tobacco playbook of pricing through volume declines.

Looking further ahead, management wants smokeless products to account for most of the business by 2035. That deadline gives the Vuse and Velo franchises a strategic weight beyond their current contribution: they are the bridge between a shrinking cigarette base and the portfolio the company intends to run a decade from now.

What does this change for investors?

The reinstated Overweight rating gives fund managers a sell-side anchor for a stock that had sat at Neutral. The 5,300-pence target, the 3% to 5% constant-currency sales growth scenario, and the 5% to 8% EPS guidance together sketch a company whose cash returns — £1.3 billion of 2026 buybacks among them — continue while growth returns from the smokeless side.

The open question is execution. Velo's share gain proves the pouch category rewards fast movers, but it also shows how quickly positions in this market shift. Investors buying the JPMorgan case are underwriting both the pricing power in combustibles and the durability of the smokeless momentum through 2030 and beyond.