UBS has stuck a 'sell' tag on Unilever PLC (LSE:ULVR), arguing that optimism around its upcoming ice cream spin-off may already be baked into the share price.
With the stock trading at 4,637p and the broker setting a 12-month target of 4,000p, the downside case rests on the view that the Anglo-Dutch giant's turnaround narrative faces structural and cyclical hurdles.
The spin-out, set to debut jointly in Amsterdam, London and New York in late 2025 as The Magnum Ice Cream Company (TMICC), is pitched as a margin recovery play.
UBS notes the division generated €8.3 billion in revenue and €1 billion in operating profit last year, but has been underperforming peers like Froneri in both volume growth and margins.
A tighter focus post-separation could help, but UBS warns the brand remains exposed to commodity prices, regulation, and shifting consumer tastes.
Two looming debates are likely to shape sentiment. One: Can TMICC close the profitability gap with rivals? Two: What happens with Ben & Jerry's, whose activism could limit its market potential or lead to a sale?
UBS estimates the spin-off will lift the household goods group's core margins and returns slightly, but believes these gains are already reflected in the valuation.
With macro risks and execution challenges still in play, it says investors may be getting ahead of themselves.
In afternoon trading, the shares were flat as a melted Magnum at 4,635.17p.