Stifel Nicolaus analyst Rogerio Fujimori has maintained their neutral stance on SWGAF stock, giving a Hold rating on January 1.
Geoff Meacham has given his Hold rating due to a combination of factors impacting The Swatch Group’s financial outlook. Foremost among these is the substantial appreciation of the Swiss franc in the fourth quarter of 2023, which led to a downward revision of Swatch’s 2024 sales and earnings per share (EPS) estimates by 4% and 9%, respectively. This currency strength is anticipated to create a 6% headwind for sales and a 120 basis points drag on margins in 2024, figures that consensus estimates have not yet taken into account. Moreover, Swatch’s exposure to the stronger Swiss franc, particularly against the Chinese yuan and other major currencies, has necessitated a reduction in both the sales forecast and profit target, with the latter now sitting 9% below the market consensus.
This cautious stance is further underpinned by a slower than expected recovery in consumer spending in China, a key market for luxury goods, and the absence of significant catalysts that might drive a revaluation of the stock. Despite trading at an attractive 12.5 times the estimated earnings for 2024, which is below the ten-year average, the lack of momentum for earnings growth, the normalization of sales growth, and a challenging environment for the Chinese consumer at the start of 2024 all contribute to the Hold rating. Overall, other luxury sector investment opportunities with potentially higher margins and faster top-line growth are seen as more attractive, leading to a conservative stance on Swatch Group shares unless there is a significant and unforeseen improvement in consumer confidence and spending in China.
In another report released on January 1, Jefferies also maintained a Hold rating on the stock with a CHF240.00 price target.
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The Swatch Group (SWGAF) Company Description:
The Swatch Group AG engages in the design, manufacture, and sale of finished watches, jewelry, watch movements, and components. It operates through the Watches & Jewelry, and Electronic Systems segments. The Watches & Jewelry segment is involved in the designs, production, and marketing of watches and jewelry. The Electronic Systems segment develops, manufactures, and sells electronic components; and sports timing activities. The company was founded by Nicolas Georges Hayek in 1983 and is headquartered in Biel, Switzerland.
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