Morgan Stanley bearish on Unilever stock, cites 'intense competition'

  • Stock Market News
Morgan Stanley bearish on Unilever stock, cites 'intense competition'
Credit: © Reuters.

On Tuesday, Morgan Stanley adjusted its stance on shares of Unilever (LON: ULVR ) plc (NYSE:UL), downgrading the stock from Equalweight to Underweight. In conjunction with this change, the firm also reduced the price target for the company's shares to $48 from the previous target of $52.

According to the investment firm, while Unilever's management strategy appears sound, what could prompt a further positive reassessment of the stock over the upcoming year remains uncertain. The current valuation suggests that successful strategy execution is already reflected in the share price.

The firm noted that Unilever's reinvestment efforts are expected to be a gradual process and highlighted the intense competition within the sectors the company operates in. Despite trading at only a slight premium to the sector based on price-to-earnings (P/E) ratio, Unilever's cash conversion is below average due to consistently high non-underlying costs.

Morgan Stanley pointed out that Unilever's medium-term growth prospects are in line with the sector, despite the company having a significant presence in emerging markets, which are typically expected to grow more rapidly. The revised price target set by Morgan Stanley is now $48, which corresponds to £37.75.

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