Unilever PLC (LSE:ULVR) shares fell to their lowest since July after analysts at RBC Capital Markets said the Vaseline, Lynx and Cornetto owner "hasn't the wherewithal" to grow sales volumes as much as it wants.
The FTSE 100 consumer good group's aim is to grow volumes 2% but analyst James Edwardes Jones said this is unlikely given various factors, including a "lack of market dominance", as it is market leader in only half of its business once it has spun off its ice cream arm.
Other reasons include a significant amount of "non-focus brands" and "non-focus markets", representing 25% of group sales and 15% of sales respectively; a less benign gross margin environment and a record of spending significantly on lower capital investment than the competition.
Unilever's valuation is "pushing towards best-in-class", a level that the analyst thinks is "unjustified" and means the risk/ reward is weighted to the downside.
As a result, the rating was downgraded to 'underperform' from a previous 'sector perform' rating and reduced the price target to 4,000p from 4,800p.