Unilever Stock: The Blue-Chip to Buy and Hold in 2023

Summary:
• Unilever share price has staged a strong recovery in the past few weeks. It has surged from the year-to-date low of $42.55

Unilever share price has staged a strong recovery in the past few weeks. It has surged from the year-to-date low of $42.55 on October 14 to a high of $51.71. In the UK, the ULVR stock price has climbed from a low of 3,274p to a high of 4,232p. It is sitting close to the highest level since June 2021.

Prices helps stabilize Unilever

Unilever is a global company in the consumer staples industry that produces and sells some of the best-known brands in the world. Some of its well-known brands are Dove, Domestos, Knorr, Vaseline, Axe, and Hellman’s. About 12 Unilever brands make over $1 billion in revenue every year.

Unilever share price has recovered in the past few weeks as investors react to the company’s slow but promising growth. In the most recent quarter, the company’s underlying sales growth accelerated to 10.6%, helped by its strong pricing power. The firm has had a strong revenue growth in the past seven straight quarters. 

In its guidance, the company said that it expects its full-year underlying sales growth to be about 8%. It expects its underlying operating margin for the full year to be 16%. This margin is expected to rebound in 2023 and 2024 as costs of doing business rise. The CFO said:

“We will continue to navigate the inflationary pressure while investing for growth to support the long-term health of our brands by investing more in advertising, R&D and capital expenditure.”

The blue chip to own

Unilever share price has risen for several reasons. First, the company is an undervalued company that trades at a multiple of 19.77 of next year’s estimated earnings. This is a significant discount considering that Estee Lauder trades at a multiple of 46 while L’Oreal trades at a multiple of 30. Procter & Gamble trades at a forward PE of 25. 

Unilever has a price-to-cashflow ratio of 15.61, which is also much lower than other companies. This undervaluation stems from the challenges that the company went through a few months ago.  

Second, the company will benefit as inflation continues dropping and supply chains reopen. It will be able to leave prices of some products higher as costs fall. Third, Unilever is working to reposition its business. For example, it is considering selling its Klondike and Breyers brands in a deal estimated to be worth over $3 billion.

Unilever share price forecast

The daily chart shows that the ULVR share price has been in a strong bullish trend in the past few months. In this period, it has formed an ascending channel that is shown in red. It has remained above all moving averages and is between the channel. The shares have also moved to the 78.6% Fibonacci Retracement level.

Therefore, the stock will likely continue rising in 2023 as the company gains momentum. If this happens, the next key level to watch will be at 4,500p. A drop below the support at 4,000p will invalidate the bullish view.