Philip Morris International: Why 2026 Could Be the Tipping Point for Its Smoke-Free Dominance

Philip Morris International (NYSE: PM) has been a strong performer this year. The stock has fallen 20% from its high, yet shares are still up by more than 24% since January, outpacing the broader stock market.

The tobacco stock has emerged as a clear winner in the new-look nicotine and tobacco space, where traditional cigarettes and chewing tobacco are losing ground to smoke-free alternatives, such as electronic vapes, heat-not-burn devices, and oral nicotine salt pouches.

Philip Morris was an early mover in the heat-not-burn market with Iqos. Then, it acquired Swedish Match a couple of years ago, giving it ownership of Zyn, the most popular oral nicotine brand. Smoke-free products now account for 41% of the company's revenue. Meanwhile, Philip Morris continues to sell Marlboro cigarettes in almost every country except the United States.

Next, the company could hit a new gear entirely in 2026. Here is what you need to know.

Image source: Getty Images.

Welcome to America

Philip Morris International was formerly part of Altria Group until a spinoff in 2008. For years, Altria sold Marlboro cigarettes in the United States, while Philip Morris sold them internationally. However, Philip Morris has recently begun to encroach on the lucrative U.S. market with other products.

The company established a foothold in the U.S. with Zyn and is now targeting Altria and other traditional cigarette companies with Iqos. Philip Morris developed Iqos years ago as an alternative to cigarettes, and it has thrived in foreign markets. The device heats tobacco to the point of producing vapor, but not enough to burn it and cause it to smoke.

The U.S. market offers a massive growth opportunity, even for the world's largest publicly traded tobacco company. Altria's sales of smokeable products totaled $21.2 billion last year. Philip Morris reports an approximate 72% success rate in converting smokers to Iqos.

Ready to ignite growth in 2026

Philip Morris is currently awaiting FDA approval to sell Iqos Iluma in the United States, the latest and most advanced version of its heat-not-burn device, launched following a patent dispute with British American Tobacco.

It's now been more than two years since Philip Morris filed its application for Iluma in October 2023. Based on past approvals, a decision should come soon. In the meantime, Philip Morris has conducted small-scale test launches using its old Iqos device in a couple of cities.

Assuming Iluma is approved, Philip Morris would likely begin a broad U.S. launch campaign. That could pour gas on a red-hot Zyn brand, which sold a whopping 204.9 million cans in the United States during the third quarter alone, a 37% increase over the prior year.

Gobbling up market share in a massive United States market will likely bolster growth at Philip Morris for the foreseeable future, making it a fantastic dividend stock to buy and hold. The stock already yields 4%, and analysts estimate the business will grow earnings at an annualized rate of 11% over the long term.

If all goes according to plan, investors might look back at 2026 as a pivotal year and the stock's current dip as a no-brainer buying opportunity.

Justin Pope has no position in any of the stocks mentioned. The Motley Fool recommends British American Tobacco P.l.c. and Philip Morris International and recommends the following options: long January 2026 $40 calls on British American Tobacco and short January 2026 $40 puts on British American Tobacco. The Motley Fool has a disclosure policy.