There's a new vape pen taking over America — and it has Wall Street worried about tobacco stocks (MO, PMI)

JUUL In Hand Female Black Tank Small

The Juul, a wildly popular vape pen with twice the nicotine content of similar devices, is starting to encroach on big tobacco's financial terrain.
In a recent memo, Citigroup analysts warned investors that the device's sales could have a negative effect on tobacco stocks such as Altria and British American Tobacco.
But the Juul isn't just popular among adults, and scientists say its potential health effects are concerning.
Shares of Altria and Philip Morris International plunged Thursday after disappointing earnings reports showing that sales of its new products were not meeting expectations.

A new vape pen is starting to encroach on big tobacco's financial terrain.

In a recent research note, Citigroup analysts warned investors that the Juul, an e-cigarette that's particularly appealing to former smokers because of its powerful nicotine punch, was beginning to disrupt tobacco stocks.

The note suggested that the rise of the Juul could bode poorly for tobacco companies — including Altria, British American Tobacco, and Imperial Brands — as sales are falling faster than they should.

The analysts expect a sustained slowdown for tobacco companies — something they see as directly attributable to the Juul and its "rapid growth." They said its skyrocketing sales would pose a significant challenge to traditional tobacco earnings.

"The US tobacco market is beginning to be disrupted by Juul," the analysts wrote, adding, "We don't expect underlying cigarette trends to improve much in the rest of 2018."

Several tobacco companies, such as Altria, Philip Morris, and British American Tobacco, make so-called next-generation devices designed to compete with the Juul, but most have failed to generate profit for companies.

On Thursday, shares of Altria and Philip Morris International plunged, most likely as a result of disappointing earnings reports showing that sales of its new products were not meeting expectations.

In 2016, Philip Morris International launched the Iqos, a heat-not-burn device that lies somewhere between a regular cigarette and an e-cig and is expected to be approved by the Food and Drug Administration later this year.

But that device isn't expected to protect Altria — which maintains sole distribution rights for the product in the US — from the slump, the analysts said.

Vaping and the future of big tobacco

Unlike cigarettes, which burn their ingredients, e-cigs or vape pens heat vapor via a small portable device.

The Juul, which comprises an e-cig device and interchangeable pods that contain nicotine, is one of the most popular vape pens, having generated a whopping $224 million in retail sales from November 2016 to November 2017 and snagging one-third of the total e-cig market share during the four weeks that ended November 4.

But the Juul is also trendy among teens — something that has been a big red flag for scientists, who warn that nicotine is highly addictive and damaging to the developing brain.

Several other health concerns related to vaping are also emerging.

A study published this spring found that some of the toxic metals in conventional cigarettes were present in e-cigs.

Another found that at least some of those toxins appeared to make their way through the body, as evidenced by a urine analysis by researchers who randomly sampled about 100 people in the Bay Area who vape.

And research presented recently at a large conference found substantial evidence tying daily e-cig use to an increased risk of heart attack.

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