Unilever Faces Downgrade

Unilever, the maker of popular products like Hellmann’s mayonnaise, saw a decrease in its shares as Morgan Stanley downgraded its rating to the equivalent of a sell.

Downgrade Details

• Rating: Unilever was downgraded from equal-weight to underweight by Morgan Stanley.
• Price Target: The price target was cut to $48 from $52 ($3775 pence from 4100 pence).
• Stock Movement: Unilever’s London-listed stock fell by 2% to 3920 pence.

Reasoning Behind Downgrade

Analysts, led by Sarah Simon, highlighted several reasons behind the downgrade. They mentioned that Unilever currently trades at a slight premium compared to other staples stocks. However, they expressed concerns about Unilever’s ability to achieve the high end of its 3% to 5% organic sales growth target, especially given its substantial exposure to emerging markets. Particularly in India and Indonesia, tougher trading conditions were noted for Unilever.

Impact on Ice Cream Segment

The note also pointed out Unilever’s exposure to the ice cream market, which has been negatively affected by GLP-1 weight-loss drugs.

Alternatives Recommended

As an alternative to Unilever, analysts suggested looking into GSK spinoff Haleon for consumer health exposure and L’Oreal for its emphasis on global beauty products. L’Oreal, in fact, received an upgrade to buy from hold at Berenberg due to its forecasted 6.7% organic sales growth from 2025 to 2030 – the highest among household and personal care stocks covered.

Market Movement

While Unilever faced a downgrade, broader European markets remained relatively steady on Tuesday. The German DAX saw a modest 0.4% increase, whereas the UK’s FTSE 100 slipped by 0.1%.