The last month has seen global consumer goods company Unilever’s (LSE: ULVR) share price rise nearly 6%. However, year-to-date, the stock is down 12%. The firm owns a variety of popular brands, including Sure, Vaseline, and Ben & Jerry’s.
So, with the Unilever share price down in 2022, is this an opportunity for me to add the stock to my portfolio? Let’s take a look.
Why is the share price down?
Let’s begin by taking a look at why the Unilever share price is falling. To start, the firm has been largely impacted by rising inflation. It has seen its costs rise and coupled with the firm failing to grow its sales volumes, it’s clear to see why the stock has struggled.
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Chief executive Alan Jope recently mentioned how inflation will be one of the biggest challenges the business faces this year. And, as such, the firm expects between 140 to 240 basis points to be hacked off its underlying operating margin. This will most certainly have an adverse impact on the price of Unilever shares.
It has also come under large pressure from investors of late. This includes issues surrounding new targets for selling more healthy foods. And further pressure was applied after its recent failed bid for GlaxoSmithKline’s consumer healthcare division. With its bid in the region of £50bn, shareholders deemed the move unsustainable given the firm’s financial position. With many holding a preference for focusing on sales and profit growth, the Unilever share price dropped 11% as a result.
Wider outlook
However, there are wider issues I must consider when looking at Unilever.
One positive is that its risk is diversified. The business has global sales and a solid distribution network. It also owns strong brands and has established relationships with retailers. From this point of view, Unilever shares seem a solid buy.
As well as this, RBC recently increased its price target for the firm from 3,400p to 3,600p. In part due to its solid recovery post-Covid, it was also because of the recent stake built up by Nelson Peltz’s activist hedge fund Trian Partners. With a history of streamlining consumer goods groups, this could provide Unilever with a boost in the future.
Should I buy?
So, where do I stand regarding Unilever? I think in the near term the firm will face a variety of issues. For example, inflation will hurt the business. And should it continue to rise, I think the Unilever share price could drop even further. Pressure from shareholders is also an issue. Should their trust in management continue to weaken, we may begin to see more investors offload shares.
However, these are short-term issues. Unilever has a strong fundamental business structure. And the presence of Trian should help guide the firm in the right direction. Because of this, I would be willing to add a speculative amount of Unilever shares to my portfolio.
