Why Turning Point Brands Stock Fell 15.5% This Week
Key Points
Turning Point Brands has a fast-growing nicotine pouch brand called Fre.
The FDA is apparently hesitant to approve new nicotine pouch types because of safety concerns for children.
Shares of Turning Point Brand are down 50% from highs.
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Turning Point Brands (NYSE: TPB) fell 15.5% this week, according to data from S&P Global Market Intelligence. The company with brands in tobacco rolling papers, chewing tobacco, and the fast-growing nicotine pouch category was hit because of reports of slowing approvals for nicotine pouches from the Food and Drug Administration (FDA).
Here's why the stock was falling this week and whether it belongs in your portfolio right now.
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Hesitant FDA approvals
Cigarette usage is declining in the United States, but is being replaced by nicotine pouches. These tobacco-free pouches offer a cleaner feel than chewing tobacco, making them more accessible for everyday life and popular among a wider customer base.
Turning Point Brands' stock had soared on the back of its fast-growing nicotine pouch brands, led by Fre cans. Revenue from the segment grew 266% year-over-year last quarter to $41.3 million, making up 34% of total company revenues. Guidance calls for net revenue of $180 million to $190 million for the category in 2026.
This week, reports have surfaced that the FDA is hesitant to grant new pouch licenses in the United States due to unknown health impacts and their use among younger kids. It could be a scare that was similar to the vaping epidemic around a decade ago.
Image source: Getty Images.
Time to buy?
After reporting disappointing earnings, Turning Point Brands' stock is down 50% from its highs and is declining further. Shares have a market cap of $1.3 billion, which could be cheap, given the steady revenue from rolling papers, chewing tobacco, and nicotine pouches.
If you believe that this FDA reporting is only a small bump in the road, then Turning Point Brands could be a good stock to buy for your portfolio today.
Should you buy stock in Turning Point Brands right now?
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Brett Schafer has no position in any of the stocks mentioned. The Motley Fool recommends Turning Point Brands. The Motley Fool has a disclosure policy.
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