- Altria Group (NYSE:MO), Reynolds American (RAI), and Lorillard Inc. (LO) all jockeying for position in the fast growing sector e-cig sector.
- Vapor Corp (VPCO) achieved record revenues for both the fourth quarter and year, ending December 31st and has third greatest distribution in USA.
- Buy Vapor Corp (VPCO) today as I see it as a high-potential takeover target.
Lorillard was a first-mover, acquiring existing e-cig producer Blu in 2012.
Blu eCigs and their other product lines are the most popular selling devices in America - by a wide margin. The company has nearly 50% of the electronic market locked up and Blu's popularity continues to grow.
Not to be left behind, new e-cig products from Reynolds and Altria launched with huge marketing campaigns. Reynolds offers Vuse, while Altria offers MarkTen. Altria also recently purchased Green Smoke Inc.'s E-vapor business for approximately $110 million.
Tobacco industry analyst Bonnie Herzog at Wells Fargo Securities recently estimated that within eight years, tobacco giant Reynolds American will generate $4 billion in sales from their electronic products, surpassing the $3.9 billion anticipated from traditional cigarettes.
In a separate article, Wells Fargo further states that the e-cigarette market is a $2 billion market that could potentially grow to $10 billion by 2017, or five times its current value in less than four years.
With such dramatic growth projected, and dozens of other e-cig companies vying for a piece of the pie, I predict more acquisitions in this space -- especially if Reynolds or Altria want to close the gap on Lorillard's massive market share.
One company I see as a high-potential takeover target is Vapor Corp (NASDAQ:VPCO).
Top E-Cigarette Stock To Buy
Vapor Corp. is a US based e-cigarette company whose brands include Krave®, Fifty-One®, VaporX®, Alternacig®, EZ Smoker®, Green Puffer®, Americig®, Fumare™, Hookah Stix® and Smoke Star®.
They've been in business since 2009 when the company acquired e-cig distributor Smoke Anywhere USA.
2013 was a solid year for VPCO as it achieved record revenues for both the fourth quarter and year, ending December 31st.
Total revenues for Q4 2013 grew 56% to $7 million while total revenues for the full year grew 22% to $26 million. This improves on growth of 34% the year before.
Thanks in part to their rapid sales growth, VPCO was able to generate a net profit of $801,352 for 2013 as opposed to a loss of $1.9 million in 2012.
The company also recently completed a $10 million private placement and did a 1-for-5 reverse stock split of its common stock in order to meet the minimum bid price requirement that would be required for its stock to eventually be listed on the NASDAQ Capital Market.
I see this as a strategically important move for two reasons.
First, I think it puts pressure on Big Tobacco to come at them with an early takeover bid.
Vapor Corp. has the third largest retail presence behind Lorillard's Blu and another e-cig company, NJOY.
Its products are in over 60,000 retail locations throughout the US and Canada. To compare, Vapor Corp.'s largest competitors Blu and NJOY have a retail presence of over 136,000 stores and 80,000 retail outlets, respectively.
In addition, Vapor Corp.'s Krave® KING brand of disposable e-cigarettes are lining the shelves of all the Family Dollar Stores (FDO) across America.
This kind of distribution is a huge plus. Rather than try to cold-pitch their house brands to retailers, the bigger firms could leverage Vapor's existing relationships to introduce additional products down the road -- a far easier task to accomplish.
Second, despite being fully reporting the company has a limited following because it currently trades OTC. A move to the NASDAQ opens the door to a new world of new investors and institutional buying which, in my opinion, will push the share price higher.
With a market cap of $105 million and just 16.6 million shares outstanding, any rumors of a buyout could easily shoot Vapor's stock skywards.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.