Unilever's Massive Influencer Bet Amid Valuation and Transformation Risks

What happened

Unilever has announced a plan to increase its influencer partnerships by 20 times, targeting a gold rush in the creator economy to boost digital marketing reach. This move is part of its broader Growth Action Plan to accelerate growth in segments like Beauty & Wellbeing, which saw 4.1% growth in Q1 2025. However, the company remains in the early stages of a complex transformation, including an Ice Cream demerger and €800m productivity cuts, carrying significant execution and dis-synergy risks. Despite modest underlying sales growth of 3% in Q1 2025, Unilever's stock trades at a rich ~32x P/E, approximately 39% above its DCF-based intrinsic value of ~$42.9, indicating a thin margin of safety. While the influencer initiative may generate short-term buzz, it does not address the core issues of overvaluation and the uncertain payoff from the ongoing restructuring.

Implication

The influencer expansion may drive brand visibility and align with premiumisation trends in beauty, potentially supporting mid-single-digit growth targets. However, it introduces additional marketing costs and complexity during a period of cost-cutting and portfolio reshaping, risking margin pressure if not efficiently managed. Investors should monitor whether this leads to sustainable volume growth or merely inflates short-term expenses without lasting financial impact. Given the stock's significant overvaluation relative to intrinsic value, any execution missteps in the broader transformation could exacerbate downside risk. Therefore, until clear evidence emerges of improved growth and margin expansion from the Ice Cream demerger and productivity savings, the risk-reward profile remains unfavorable, reinforcing the POTENTIAL SELL bias.

Thesis delta

The influencer announcement is an incremental tactical effort within Unilever's existing growth strategy and does not alter the fundamental investment thesis. It underscores management's aggressive marketing approach but does not reduce the key risks of high valuation, execution uncertainty in the transformation, and competitive pressures. Thus, the DeepValue report's POTENTIAL SELL recommendation remains unchanged, pending tangible proof of accelerated growth or valuation reset.