NEW YORK (TheStreet) -- Shares of Reynolds American (RAI) are up 1.22% to $65.49 in pre-market trade after it was reported that the company told investors it plans to launch a new cigarette that will heat but not burn tobacco, eliminating combustion, which is the most harmful part of smoking, according to MarketWatch.
The new cigarette, which will be called Revo, is a rebranded version of a product that Reynolds launched two decades ago. That product flopped, but it believes Revo will appeal to smokers who don't like e-cigarettes but would like an alternative to traditional smoking, MarketWatch said.
The cigarette comes with a carbon tip that, when lighted, heats the tobacco rather than burning it, so that the cigarette releases a tobacco-flavored vapor and not traditional cigarette smoke. Philip Morris International, the world's second-biggest tobacco company in sales, developed a similar product it plans to sell outside the U.S, MarketWatch reports.
"We rate REYNOLDS AMERICAN INC (RAI) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, growth in earnings per share, expanding profit margins and increase in net income. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."