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- PM 3Q25 - Peak Zyn? Bull case $215 Bear case $115
PM 3Q25 - Peak Zyn? Bull case $215 Bear case $115
Cheat Sheets
PHILIP MORRIS INTL (PM)
🚀 Smoke-Free Leader | EPS $2.23 (Beat) | Revenue $10.8B (+9.4%) | ZYN +39% U.S. Growth | IQOS Dominance
Smoke-Free 41% of Revenue ↑ | Total Volume +0.7% | ZYN 47 Markets | IQOS 75%+ HTU Share | OI Margin 43.1% | 2025 EPS: $7.43-$7.56
💰 Market Cap: $246B | 🏢 69k Employees | 🌍 100+ Countries
👨💼 CEO Jacek Olczak | 🎯 #1 IQOS, ZYN | 🇺🇸 Stamford, CT
$144.47
📉 -$13.59 (-8.6%) Today
+19% YTD | -23% from 52-wk High
Price Targets (12-18 Months)
Current Price: $144.47
$215.00
Bull Case (+49%)
Smoke-Free Revolution
🚀 Needs:
ZYN hits 50%+ U.S. pouch share • IQOS cracks 15% global share • VEEV dominates EU vaping • Cigarettes stabilize at -2% • 50%+ revenue from smoke-free by 2027 • FDA approves IQOS Illuma
$175.00
Base Case (+21%)
Steady Execution
⚖️ Needs:
ZYN grows 25-30% annually • IQOS holds 9-10% share • Smoke-free hits 45% revenue by 2026 • Cigarette decline -2 to -3% • Double-digit EPS growth continues • Status quo
$115.00
Bear Case (-20%)
Regulatory Nightmare
⚠️ Risk:
FDA rejects IQOS Illuma • ZYN health scare hits • EU bans heated tobacco • Cigarette decline accelerates • Competition crushes ZYN • Valuation multiple compresses 30x→20x
The TL;DR
💰 What Happened
• Q3 EPS: $2.24 adjusted (reported $2.23) BEAT - +17.3% adjusted growth, record quarterly EPS
• Revenue: $10.8B, organic growth +5.9% (+7.3% ex-Indonesia) - RECORD quarterly revenue
• Smoke-Free: $3B+ gross profit (first time ever), 41% of revenue, 42% of gross profit
• ZYN USA: 205M cans (+37% shipments, +39% offtake per Nielsen) - accelerated from prior quarters
• IQOS: +9% adjusted IMS vs tough comp, HTU shipments 41B units (+15.5%)
• 2025 Guidance: RAISED to $7.43-$7.56 EPS (14-15% growth) from prior guidance
• Margins: 67.9% gross (highest since 2021), 43.1% OI (highest in almost 4 years)
• Revenue: $10.8B, organic growth +5.9% (+7.3% ex-Indonesia) - RECORD quarterly revenue
• Smoke-Free: $3B+ gross profit (first time ever), 41% of revenue, 42% of gross profit
• ZYN USA: 205M cans (+37% shipments, +39% offtake per Nielsen) - accelerated from prior quarters
• IQOS: +9% adjusted IMS vs tough comp, HTU shipments 41B units (+15.5%)
• 2025 Guidance: RAISED to $7.43-$7.56 EPS (14-15% growth) from prior guidance
• Margins: 67.9% gross (highest since 2021), 43.1% OI (highest in almost 4 years)
✅ Bull Case
• Portfolio DOMINANCE: 60% smoke-free market share, but capturing 70%+ of category growth = stealing share
• ZYN unstoppable: 39% U.S. offtake, 47 markets globally, CFO confirmed "best-in-class profitability" even with promotions
• IQOS beast mode: 41B HTU units (+15.5%), +9% IMS growth, guiding +10-12% full year = accelerating in Q4
• Record profitability: $3B+ smoke-free gross profit (first time ever), 67.9% gross margin (highest since 2021)
• Cost discipline: "$2B cost saving objective 2024-2026" on track + "elevated commercial investment" = offense + defense
• Raised guidance: $7.43-$7.56 EPS (14-15% growth) = 5th consecutive year of double-digit growth coming
• ZYN unstoppable: 39% U.S. offtake, 47 markets globally, CFO confirmed "best-in-class profitability" even with promotions
• IQOS beast mode: 41B HTU units (+15.5%), +9% IMS growth, guiding +10-12% full year = accelerating in Q4
• Record profitability: $3B+ smoke-free gross profit (first time ever), 67.9% gross margin (highest since 2021)
• Cost discipline: "$2B cost saving objective 2024-2026" on track + "elevated commercial investment" = offense + defense
• Raised guidance: $7.43-$7.56 EPS (14-15% growth) = 5th consecutive year of double-digit growth coming
❌ Bear Case
• Stock MASSACRED -8.6% on earnings beat = market violently rejecting the valuation, not buying the story
• SG&A spike: CFO warned "SG&A cost will increase slightly more than underlying net revenue" for full year = margin pressure
• ZYN inventory cliff: 20-30M can reduction coming in Q4 per CFO = shipment growth decelerates hard
• Valuation insane: Was 30x P/E, still 28x+ after -8.6% drop = more downside to 20-22x = $115-130 stock
• Promotions eating profits: Americas segment hit by ZYN promotional costs = margin normalization from "unusually high" levels
• Regulatory limbo: IQOS Illuma still waiting, ZYN ULTRA PMTA pending, CFO frustrated with FDA = binary risk
• SG&A spike: CFO warned "SG&A cost will increase slightly more than underlying net revenue" for full year = margin pressure
• ZYN inventory cliff: 20-30M can reduction coming in Q4 per CFO = shipment growth decelerates hard
• Valuation insane: Was 30x P/E, still 28x+ after -8.6% drop = more downside to 20-22x = $115-130 stock
• Promotions eating profits: Americas segment hit by ZYN promotional costs = margin normalization from "unusually high" levels
• Regulatory limbo: IQOS Illuma still waiting, ZYN ULTRA PMTA pending, CFO frustrated with FDA = binary risk
⚠️ The Real Talk
This is THE smoke-free transition story that's actually working. CFO Emmanuel Babeau: "We delivered very strong results in Q3...outgrew the global smokefree industry by a clear margin." They crossed $3B+ in quarterly smoke-free gross profit for the first time ever. 41% of revenue from products growing at double digits.
The numbers are INSANE: ZYN U.S. offtake accelerated to +39% (Nielsen data), now 60% estimated share of smoke-free products globally, IQOS hit 41B HTU shipments (+15.5%), VEEV more than doubled YTD. CFO: "Our portfolio is outpacing the industry...year to date share of category growth is more than 10 points higher" than their 60% market share.
But why did the stock CRATER -8.6% on a massive beat? Market is violently repricing: (1) ZYN margin compression visible in Americas segment from promotions, (2) CFO warned SG&A growing faster than revenue = cost inflation, (3) 20-30M can inventory reduction coming Q4 = ZYN shipment deceleration, (4) At 30x P/E with -8.6% drop, market saying "show me more."
CFO quote on ZYN: "Enhanced marketing and promotional intensity supported increased trial among legal age nicotine users with promising level of repurchase intent." Translation: they're spending NOW to build long-term users. Also confirmed ZYN is "best-in-class in terms of profitability for the group" even with promotions. At $144, down 23% from highs, this could be the dip to buy - or the start of a bigger repricing. Choose your poison.
The numbers are INSANE: ZYN U.S. offtake accelerated to +39% (Nielsen data), now 60% estimated share of smoke-free products globally, IQOS hit 41B HTU shipments (+15.5%), VEEV more than doubled YTD. CFO: "Our portfolio is outpacing the industry...year to date share of category growth is more than 10 points higher" than their 60% market share.
But why did the stock CRATER -8.6% on a massive beat? Market is violently repricing: (1) ZYN margin compression visible in Americas segment from promotions, (2) CFO warned SG&A growing faster than revenue = cost inflation, (3) 20-30M can inventory reduction coming Q4 = ZYN shipment deceleration, (4) At 30x P/E with -8.6% drop, market saying "show me more."
CFO quote on ZYN: "Enhanced marketing and promotional intensity supported increased trial among legal age nicotine users with promising level of repurchase intent." Translation: they're spending NOW to build long-term users. Also confirmed ZYN is "best-in-class in terms of profitability for the group" even with promotions. At $144, down 23% from highs, this could be the dip to buy - or the start of a bigger repricing. Choose your poison.
🐂 Bull Thesis
👑
IQOS = Heat-Not-Burn King
Domination: 9.1% global share, 75%+ of heated tobacco category, generated $11B revenue last year
Q3 Performance: +9% IMS vs tough comp, +15.5% shipments to 41B units, accelerating in Q4
Margins: CFO: "IQOS significant contributor" to 360bps smoke-free margin expansion
Growth: Europe & Japan crushing it, guiding +10-12% IMS growth for full year
Q3 Performance: +9% IMS vs tough comp, +15.5% shipments to 41B units, accelerating in Q4
Margins: CFO: "IQOS significant contributor" to 360bps smoke-free margin expansion
Growth: Europe & Japan crushing it, guiding +10-12% IMS growth for full year
💎
ZYN = Nicotine Pouch Beast
U.S. Dominance: +39% offtake (Nielsen), 205M cans shipped (+37%), "ahead of expectation"
Best Margins: CFO confirmed "best-in-class profitability for the group" even with promotions
Global Expansion: 47 markets now, international +100% ex-Nordics, Spain & Japan launched
Trial/Retention: "Promising level of repurchase intent" from promotional activity
Best Margins: CFO confirmed "best-in-class profitability for the group" even with promotions
Global Expansion: 47 markets now, international +100% ex-Nordics, Spain & Japan launched
Trial/Retention: "Promising level of repurchase intent" from promotional activity
📈
Record Margin Expansion
Q3 Records: 67.9% gross margin (highest since 2021), 43.1% OI margin (highest in 4 years)
Drivers: Smoke-free 70% gross margin (+60bps), IQOS scale + ZYN superior economics
YTD Monster: Smoke-free +360bps, Total PMI +260bps = transition working
Cost Savings: $2B program 2024-2026 on track despite elevated commercial spending
Drivers: Smoke-free 70% gross margin (+60bps), IQOS scale + ZYN superior economics
YTD Monster: Smoke-free +360bps, Total PMI +260bps = transition working
Cost Savings: $2B program 2024-2026 on track despite elevated commercial spending
🌍
Multi-Category Portfolio
Market Share: 60% smoke-free volume share, but capturing 70%+ of category growth
Scale: 100 markets, 25 with all 3 brands, +12% IMS growth vs <10% industry
VEEV Momentum: Shipments doubled YTD, #1 closed pod in 8 markets
Combustibles Fund It: Cigarettes -3.2%, but gross profit +4.8% = resilience
Scale: 100 markets, 25 with all 3 brands, +12% IMS growth vs <10% industry
VEEV Momentum: Shipments doubled YTD, #1 closed pod in 8 markets
Combustibles Fund It: Cigarettes -3.2%, but gross profit +4.8% = resilience
🐻 Bear Thesis
📉
Valuation = Still Expensive
The Multiple: 28x+ P/E after -8.6% drop = still premium pricing for tobacco
More Downside: Fair value 20-22x = $115-130 = another -12% to -20% pain
Market Spoke: -8.6% on a BEAT = violent rejection of valuation story
Risk/Reward: -20% downside vs +21% base case upside = broken
More Downside: Fair value 20-22x = $115-130 = another -12% to -20% pain
Market Spoke: -8.6% on a BEAT = violent rejection of valuation story
Risk/Reward: -20% downside vs +21% base case upside = broken
💱
ZYN Growth Decelerating
Q4 Headwind: CFO warned 20-30M can inventory reduction coming = shipment deceleration
Margin Squeeze: Americas segment hit by promotions, normalizing from "unusually high" profitability
Tough Comps: After 39% growth, 2026 comparisons are brutal
Share Regain: Lost share during shortages, now spending to win it back
Margin Squeeze: Americas segment hit by promotions, normalizing from "unusually high" profitability
Tough Comps: After 39% growth, 2026 comparisons are brutal
Share Regain: Lost share during shortages, now spending to win it back
💊
Regulatory Wildcard
IQOS Illuma: Still waiting FDA authorization, U.S. opportunity stalled
ZYN ULTRA: PMTA pending, CFO frustrated wanting "level playing field" as peers launch anyway
Binary Risk: One FDA rejection, EU ban, or health study = category destroyed
Taxation Threat: Governments eyeing smoke-free taxation = margin + demand hit
ZYN ULTRA: PMTA pending, CFO frustrated wanting "level playing field" as peers launch anyway
Binary Risk: One FDA rejection, EU ban, or health study = category destroyed
Taxation Threat: Governments eyeing smoke-free taxation = margin + demand hit
💰
Still 59% Cigarettes
The Math: 59% revenue from cigarettes declining 3.2%, need smoke-free >50% before acceleration
Q3 Saved by EM: Turkey/Egypt volumes "better than expected" propped up results = volatile dependence
Structural Decline: Even at "resilient" 3% decline, dying core = transition race vs time
Cannibalization: IQOS/ZYN converting PMI's own cigarette smokers = some growth is just revenue shift
Q3 Saved by EM: Turkey/Egypt volumes "better than expected" propped up results = volatile dependence
Structural Decline: Even at "resilient" 3% decline, dying core = transition race vs time
Cannibalization: IQOS/ZYN converting PMI's own cigarette smokers = some growth is just revenue shift
This analysis is for informational purposes only and should not be considered investment advice. Please consult with a financial advisor before making investment decisions.
