Experts are predicting that electronic cigarette sales in the United States will more than double this year. They expect sales to exceed $1.7 billion. Analyst Bonnie Herzog from Wells Fargo stated that data shows retail sales of electronic cigarettes have already reached $700 million, with estimates of $500 million to $625 million for on-line sales. Herzog predicts total retail and on-line sales of $1.7 billion by end of the year. While the growth in electronic cigarettes is impressive, it still pales in comparison to the $80 billion spent on traditional cigarettes. Herzog had previously predicted that sales of electronic cigarettes will overtake traditional cigarettes within the next decade.

Electronic cigarettes use smokeless vapor to simulate tobacco smoke, and utilize an oil containing nicotine to deliver a fix to smokers. The devices heat the oil to create a vapor which the user inhales. Electronic cigarettes mimic the smoking experience, except without the smoke and ash. It can be used in places where traditional cigarettes are not allowed. However, the main reason that more users will likely turn to the product though is the cost. Traditional cigarettes have taxes that can reach as much as $5.85 in New York City. The nationwide average tax per pack is $1.53. V2 Cigs estimates that a pack a day smoker paying an average of $7.20 a pack can save $2081 over the course of a year by using its products resulting in substantial savings

Electronic cigarette manufacturers may face additional hurdles in the near future. The devices have not been regulated by the FDA up to this point. This has allowed the companies to grow without regulatory intrusion. That will soon change though. The FDA indicated it will release regulations on unspecified tobacco products in October. Market participants believe this refers to electronic cigarette products. The regulation of the products will definitely impact how the industry grows moving forward.

There are a number of private and publicly-traded players in the e-cigarette sector. One of the traditional cigarette manufacturers which was an early adopted of the vapor technology is Lorillard, Inc. (NYSE: LO). Lorillard manufactures and distributes tobacco products under the brand names of Newport, Kent, True, Maverick and Old Gold. Lorillard acquired Blu Ecigs for $135 million in April of 2012. For the second quarter, net sales increased 4.2 percent to $1.084 billion while adjusted EPS increased 11.0 percent versus the prior year quarter. Blue Ecigs had revenues of $57 million in the second quarter, with a 40 percent retail market share. The Company’s stock is up 11.7 percent year to date, but is down 2.51 percent in the last week. It hit a 52-week of $37.21 in mid-May, and a low of $30 in mid-November of 2012. The stock has a current dividend yield of 5.2 percent.

Reynolds American Inc. (NYSE: RAI) began rolling its own product out in Colorado in July, with plans to expand nationally thereafter. Reynolds’ share price is up 18 percent year to date, but is off its 52-week high of $52.93 hit on July 19, 2013. The price is currently below the 20-day and 50-day SMA. It is trading with a forward P/E of $13.86. The stock has a current dividend yield of 5.29 percent.

New regulations from the FDA could put a momentary hamper on the growth of the electronic cigarette market. Any pause in momentum is likely to be short lived. As more smokers look to save money, or become fed up with the traditional smoking experience, sales of electronic cigarettes will continue to grow.

Disclosure: The author has no position in the stocks mentioned herein, and no plans to initiate a position in the next 72 hours.