Here’s what I’m waiting for with the Unilever share price in 2025

The Unilever share price has had a very strong 2024. But Stephen Wright thinks a potential opportunity could be coming up in the year ahead.

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Of the 23 analysts covering Unilever (LSE:ULVR), over half of them think investors should buy the stock at the current share price. But I’m not doing this – at least not right now.

Created with Highcharts 11.4.3Unilever PriceZoom1M3M6MYTD1Y5Y10YALL30 Dec 201930 Dec 2024Zoom ▾Jan '20Jul '20Jan '21Jul '21Jan '22Jul '22Jan '23Jul '23Jan '24Jul '242020202020212021202220222023202320242024300035004000450050005500www.fool.co.uk

The company’s preparing to spin off its ice cream division in 2025. And while I think this is a good move, it creates too much short-term uncertainty for me.

Ice cream sales

Unilever has some of the world’s leading ice cream brands on its roster. And its most recent update reported strong sales growth of 9.8%, albeit set against a weak performance in 2023.

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Despite this, the company intends to divest this part of the business in the next 12 months and I think the rationale for doing so is sound. The main issue is that it’s capital intensive.

Ice cream needs a frozen supply chain, making it expensive to produce, transport, and store. This might not be an issue for a company that has a wider a range of frozen products, but that’s not Unilever.

As a result, the firm’s looking to focus on its other divisions. And these have also been growing well in 2024, which I think justifies the CEO’s ongoing strategy. 

The big risk

The big unknown with Unilever at the moment is what the company will be able to get by selling its ice cream business. And there’s a lot at stake here. During the first nine months of 2024, the unit brought in around 15% of total revenues, so the company needs to realise a decent price by selling the business. But there are no guarantees.

I think Unilever’s best outcome is to find a buyer that can incorporate its brands into an existing infrastructure. But the intention to sell is well-known and that isn’t usually conducive to attracting high prices.

Earlier this year, the Financial Times reported earlier this year that Unilever’s looking to launch the unit as a standalone business. And that’s what’s catching my attention for 2025.

The opportunity

I’m waiting to see what happens with Unilever this year. But I’m very much open to the idea that there could be a big opportunity on the way if the ice cream unit trades by itself on the stock market.

Stocks that come onto the market through divestitures are often unpopular with investors. Haleon, for example, initially fell 22% after being spun out of GSK, before climbing 55%.

Created with Highcharts 11.4.3Haleon Plc PriceZoom1M3M6MYTD1Y5Y10YALL30 Dec 201930 Dec 2024Zoom ▾Jan '20Jul '20Jan '21Jul '21Jan '22Jul '22Jan '23Jul '23Jan '24Jul '242020202020212021202220222023202320242024www.fool.co.uk

Likewise, WK Kellogg shares fell 30% after being divested from Kellanova. But it has almost doubled since then and investors who bought at the lows would be getting over 6% back each year in dividends.

Created with Highcharts 11.4.3WK Kellogg PriceZoom1M3M6MYTD1Y5Y10YALL30 Dec 201930 Dec 2024Zoom ▾Jan '20Jul '20Jan '21Jul '21Jan '22Jul '22Jan '23Jul '23Jan '24Jul '242020202020212021202220222023202320242024www.fool.co.uk

This is where I think the opportunity might be. I’ll be looking at what happens with the ice cream company, especially if it appears as a standalone business on the stock market.

Risks and rewards

Uncertainty over the outcome of the firm’s plan to divest the business makes it hard to work out what the Unilever share price should be. But I’ll be keeping a close eye on the company.

With where the stock is right now, it’s likely I’ll be more interested in the new company than the existing one. But I’m not ruling anything out going into 2025.

But there may be an even bigger investment opportunity that’s caught my eye:

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Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Stephen Wright has positions in Kellanova, WK Kellogg, and Unilever. The Motley Fool UK has recommended GSK, Haleon Plc, Unilever, and WK Kellogg. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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