Billionaire Philippe Laffont Invests in Philip Morris International

In the first quarter, billionaire investor Philippe Laffont of Coatue Management added a significant position in Philip Morris International (NYSE: PM). This tobacco company uniquely combines growth opportunities with a defensive industry profile.

Laffont primarily focuses on technology, as indicated by his portfolio, which includes notable holdings such as Meta Platforms, Amazon, Taiwan Semiconductor, Microsoft, Nvidia, Spotify, and Atlassian. Nonetheless, he also diversifies into other sectors, maintaining substantial positions in utility Constellation Energy and industrial giant Eaton.

Investment Details and Context

While investing in Philip Morris is a shift from his usual focus on tech, it remains within his strategic approach. In Q1, Laffont invested over $220 million in the tobacco company, marking it as his fourth-largest acquisition and the second-largest new addition, following a $555 million investment in data center developer CoreWeave.

Image source: Getty Images.

Reasons Behind Laffont’s Choice

Laffont’s interest in Philip Morris can be attributed to the company’s growth potential, especially through its smokeless products, Zyn and Iqos.

Zyn, a flavored nicotine pouch, has rapidly gained popularity in the U.S., particularly among young adult males, office workers, and women. Its subtlety, lacking the smell of cigarettes, has contributed to its appeal. Additionally, the product has garnered significant social media attention.

In Q1, Zyn’s U.S. shipment volumes soared by 53%, reaching 202 million cans. While some of this growth resulted from restocking, consumer demand remains robust. Consequently, Philip Morris has revised its Zyn shipment outlook for the year to between 800 million and 840 million cans, up from a previous estimate of 780 million to 820 million.

Similarly, Philip Morris’ Iqos heated tobacco product is attracting interest in international markets. This battery-operated device heats tobacco sticks to generate a nicotine aerosol without combustion—positioned as a premium alternative to smoking. Notably, Iqos has achieved significant traction in markets like Japan.

Last quarter, volumes of the company’s heated tobacco units (HTUs), which include Iqos, rose nearly 12% to 37.1 billion units. Sales to end users increased by 9% in Japan and over 7% in Europe, with strong growth also emerging from cities beyond these markets.

Philip Morris has acquired Iqos’ U.S. rights from Altria and plans a broader rollout in the U.S. once its new Iluma system receives FDA approval. Currently, Iqos is being piloted in Austin, Texas, using its older heating device. This entry into the U.S. market could significantly benefit Philip Morris, as it will not compete with existing customers, given that the company does not sell cigarettes domestically.

Zyn and Iqos offer better unit economics compared to traditional cigarettes. Philip Morris has reported that Zyn’s product contribution levels are six times higher than traditional combustible tobacco, while Iqos’s contribution is about 2 to 2.5 times higher, making both products more profitable for the company.

Philip Morris has also managed to evade many challenges faced by other tobacco companies selling cigarettes in the U.S. While U.S. cigarette volumes are declining due to health concerns and the rise of vaping, the company continues to see modest cigarette volume growth in international markets where smoking is more widely accepted. This, coupled with strong pricing power, contributes to solid growth in its cigarette business alongside the growth of Zyn and Iqos.

Evaluating Philip Morris as an Investment

Despite potential global recession risks, Philip Morris is considered resilient, supported by stable demand for nicotine products. The company benefits from a global manufacturing network, mitigating tariff exposure. Notably, Zyn is manufactured in Kentucky, and a new facility is being constructed in Colorado to meet increasing demand. Furthermore, Philip Morris operates factories close to key markets, including major sites in Poland for Europe and the Philippines for Asia.

The stock is also seen as attractively valued, trading at a forward price-to-earnings (P/E) ratio of under 23, based on the consensus for 2025, with a PEG (price/earnings-to-growth) ratio below 0.35. Stocks with PEG ratios below 1 are often viewed as undervalued.

PM PE Ratio (Forward) data by YCharts.

Given its defensive characteristics, growth potential, and favorable valuation, Philip Morris remains a strong consideration for investors. Following Laffont’s investment, it may be worthwhile for investors to consider buying shares at current levels.

Investment Consideration for Philip Morris International

Before deciding to invest in Philip Morris International, it’s prudent to evaluate its current position within the market context.

While it has notable attributes, investors should weigh this against a landscape of various growth opportunities available in the market now.