Investing.com -- Kepler Cheuvreux upgraded Swatch Group to Buy from Reduce and raised its price target to CHF225 from CHF180, arguing that stronger-than-expected sales momentum, improving profitability and higher earnings estimates leave the Swiss luxury watchmaker well positioned for a valuation re-rating.
The brokerage said Swatch's local-currency sales growth has been stronger than expected, supported by the successful launch of the Royal Pop collection in the lower- and mid-tier segments. It also highlighted higher price points at Omega, the company's largest brand, alongside improving demand for Breguet, which has been repositioned with a secondary-market pricing focus.
Kepler acknowledged headwinds including Swiss franc strength, U.S. tariff uncertainty and elevated gold prices, but said these risks are now easing. It also expects profitability to continue improving into 2027, a trend it believes the market has yet to fully reflect.
The brokerage added that management's approach to cost controls, inventory management and capital allocation appears to be improving, reducing previous concerns over execution. It also expects Swatch's collaborations with watch brands at higher price points to strengthen consumer appeal, lift volumes and support margins.
Kepler raised its earnings-per-share forecasts by about 11% for 2027-28, citing stronger local-currency revenue growth and higher margin assumptions. The revised estimates are around 40% above consensus for 2026-28, suggesting scope for further earnings upgrades if execution remains on track.
The brokerage said Swatch continues to trade below book value following recent earnings disappointments and tensions with investors, but believes positive earnings surprises could narrow the valuation discount. At its new CHF225 target price, the stock would trade at roughly 16x 2028 earnings and about one times book value.
Kepler upgrades Swatch to Buy, sees earnings recovery driving re-rating
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