Philip Morris International Inc. (PM): A Bull Case Theory

We came across a bullish thesis on Philip Morris International Inc. on Recital’s Substack by Anthony Yiu. In this article, we will summarize the bulls’ thesis on PM. Philip Morris International Inc.'s share was trading at $160.92 as of July 25^th. PM’s trailing and forward P/E were 23.81 and 21.51, respectively according to Yahoo Finance.

Philip Morris International (PMI) delivered a robust Q2 2025, with adjusted EPS up 18.9% ex-currency, raised full-year guidance, and strong momentum in smoke-free products, yet the stock fell 8.5% as lofty expectations unwound. ZYN shipments dipped sequentially from 202M to 190M cans due to anticipated inventory normalization, not demand weakness; retail offtake growth accelerated to ~37% YoY in early July, with market share and sales velocity strengthening even with minimal promotions.

Competitors, reliant on discounts, face pricing dilemmas as ZYN resumes marketing spend. The overlooked concern was a 50bps sequential share loss for IQOS in Japan, PMI’s largest heated-tobacco market, its first decline since 2021 amid heightened competition from Ploom Aura and Glo Hilo—far more critical to PMI’s thesis than ZYN. Despite this, underlying fundamentals remain strong: gross margins in combustibles expanded 140bps on 5% organic profit growth, narrowing the gap with smoke-free; prudent FX hedging ensures earnings stability; and the multi-category strategy is gaining traction, with all three smoke-free brands now in 20 markets.

VEEV shipments more than doubled YoY, achieving #1 closed-pod share in six European markets and a >10ppt gross margin lift, approaching combustible-level profitability. PMI’s premium ~22x 2025E P/E multiple, versus a 16x historical average, leaves no margin for disappointment, explaining the sharp rerating. For long-term investors, inventory phasing is transient; the key watchpoint is IQOS’s competitive standing in Japan. With its smoke-free portfolio scaling and fundamentals intact, PMI’s long-term growth case remains compelling despite the near-term sentiment-driven correction.

Previously, we covered a bullish thesis on Philip Morris International Inc. by Hidden Market Gems in April 2025, which highlighted its resilience in volatile macro conditions, pricing power, and defensive tobacco portfolio. The stock has appreciated about 6% since the thesis played out. The thesis remains valid, while Anthony Yiu shares a similar view but emphasizes near-term sentiment swings on ZYN and IQOS competition in Japan.

Philip Morris International Inc. is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 104 hedge fund portfolios held PM at the end of the first quarter which was 102 in the previous quarter. While we acknowledge the potential of PM as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None.