NEW YORK (TheStreet) -- Shares of Philip Morris (PM - Get Report) were falling in mid-afternoon trading on Tuesday as Citigroup initiated coverage of the stock with a "neutral" rating and $106 price target.
While it is a "quality company," the firm believes fellow tobacco companies Reynolds American (RAI) and Altria (MO) are superior investments at a similar price.
"We believe domestic tobacco is a more attractive asset class - for example we think litigation risk is now higher in Canada than in the U.S.," Citi wrote in a note earlier today.
The firm believes Reynolds and Altria can rerate further relative to Philip Morris because domestic tobacco earnings are more predictable, as they don't suffer from FX-related volatility. Underlying trends are currently better domestically and taxation and regulations are more benign domestically.
Additionally, Citi said it is more skeptical about the potential of Philip Morris's reduced risk products than most others.
The firm also initiated coverage of Reynolds and Altria with "buy" ratings.
Separately, TheStreet Ratings Team has a "Hold" rating with a score of C+ on Philip Morris stock.
The primary factors that have impacted the rating are mixed. The company's strengths can be seen in multiple areas, such as its expanding profit margins and solid stock price performance.
However, as a counter to these strengths, the team also finds weaknesses including deteriorating net income and weak operating cash flow.
Recently, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author.
You can view the full analysis from the report here: PM