Shares of the UK-based Unilever PLC (GB:ULVR) fell over 2% as of writing after analyst James Edwardes Jones from RBC Capital cuts the rating from Hold to Sell. Jones also reduced the price target for the stock from 4,800p to 4,000p, predicting a downside of 10.63%. RBC cited doubts about Unilever’s capacity to maintain its recent growth trajectory and achieve its goals.
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Unilever is among the leading consumer goods companies, offering products across nutrition, hygiene, and personal care segments.
RBC Flags Growth Concerns in Unilever Downgrade
RBC expressed doubts about Unilever’s ability to significantly improve its sales volumes to meet its 2% growth target. Additionally, the bank pointed out several challenges, such as Unilever’s limited market dominance, its significant share of non-core brands and markets, a less favorable environment for gross margins, and the company’s planned reduced capital investment as compared to competitors.
On the other hand, RBC also highlighted that investors now view Unilever as a top-tier company. This change is driven by a revitalized senior management team, a few strong quarters, a positive operational strategy, and the decision to sell the ice cream business. However, Jones still believes the 2% growth target is quite ambitious. RBC noted Unilever’s underwhelming volume growth, which has averaged under 1% annually since 2014. Moreover, it expressed concerns that the divestment of the ice cream segment will not significantly improve those figures.
Moreover, RBC stated that Unilever has consistently underinvested in capital expenditures over the years and suggested that a sustained increase in investment would be essential for the company to achieve its 2% volume growth target.
Is Unilever a Buy or Hold?
Overall, ULVR stock has received a Moderate Buy rating based on a total of 11 recommendations on TipRanks. It includes five Buy, four Hold, and two Sell recommendations. The Unilever share price target is 4,874.0p, which is 9.23% above the current trading price.
