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Unilever upgraded amid “bleak” sentiment, Jefferies says downside risks now limited

Upgrading based on weak share price means Jefferies doesn't 'hate' the Marmite owner, but analysts don't quite 'love' it either.

Unilever PLC - Unilever upgraded amid “bleak” sentiment, Jefferies says downside risks now limited

There are probably better ways to get an ‘upgrade’ nonetheless recent share price weakness is what’s behind Jefferies moving to ‘buy’ on Unilever PLC (LON:ULVR).

Jefferies, in the wake of “a material correction” in the share price, sets a new price target of 5,000p which suggests some 12% upside to the current market price.

“Sentiment is bleak and consensus has chosen to interpret FY20 growth guidance conservatively,” Jefferies analyst Martin Deboo said in a note.

READ: Unilever issues warning as growth fails to speed up

He added: “A surprise FY20 warning, just prior to Christmas, has taken 8% off the shares.”

“Sentiment is weak: The recent seminar underwhelmed. CEO Alan Jope is yet to win the confidence of the market. Former Chair Marijn Dekkers has upped sticks to run a biotech fund.”

Jefferies noted that there’s “signs of green shoots in key markets” and that the lower market valuation may be a “spur to action” or “an invitation for activism”.

Rounding off his view, Deboo said: “Foreseeable catalysts, most obviously in the form of growth surprises, a return to buybacks and/or portfolio moves, feel unlikely prior to H2.

“Activism is impossible to predict, but of material probability in our view. In the meantime, we think the downside risks - to numbers and relative valuation - are limited.”

Quick facts: Unilever PLC

Price: 4170 GBX

Market: LSE
Market Cap: £109.6 billion

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