RBC announced on Monday that it had downgraded its opinion on Unilever shares from 'perform in line with sector' to 'underperform', with a target price cut from 4800 to 4000 pence.
The Canadian broker believes that the FMCG group does not have sufficient resources to achieve its 2% growth target, due to its lack of market leadership.
In his view, the Anglo-Dutch group will only have a 'leading' position in half its categories once the ice cream business has been split off.
RBC also points to the company's history of under-investment compared to its competitors, a trajectory it intends to maintain in the future.
While the stock's valuation now places it among the best in the sector, the broker deems this premium 'unjustified' and considers that the risk/return profile is currently trending downwards.
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Unilever PLC (Unilever) is one of the world's leading suppliers of Beauty & Personal Care, Home Care, and Foods & Refreshment products with sales in over 190 countries and reaching 3.4 billion consumers a day. Over half of the company's footprint is in developing and emerging markets. Unilever has around 400 brands found in homes all over the world, including Dove, Knorr, Dirt Is Good, Rexona, Hellmann's, Lipton, Wall's, Lux, Magnum, Axe, Sunsilk and Surf. Unilever's Sustainable Living Plan (USLP) underpins the company's strategy. The USLP creates value by driving growth and trust, eliminating costs and reducing risks. Since 2010 the company has been taking action through the Unilever Sustainable Living Plan to help more than a billion people improve their health and well-being, halve its environmental footprint and enhance the livelihoods of millions of people as it grows its business. Unilever has already made significant progress and continues to expand its ambition, committing to ensure 100% of its plastic packaging is fully reusable, recyclable or compostable by 2025.
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