Reasons Behind the Surge in Swatch Stock This Week

Swatch Group’s stock saw a significant increase this week, largely driven by speculation about a possible take-private scenario after remarks from CEO Nick Hayek, according to analysts from Bernstein.

In a recent interview, Hayek suggested that privatizing Swatch could be beneficial, especially in light of the company’s historically low share prices. Although he later clarified that there were no current plans to pursue such a move, his comments reignited investor interest and discussions about the company’s future prospects as a private entity, particularly given its lackluster performance in public markets.

Bernstein analysts had previously highlighted the reasoning behind a potential privatization, asserting that delisting could give the Hayek family—who have long been at the helm of Swatch—greater flexibility to implement necessary changes without the constraints of public market pressures. They also noted Swatch’s weak stock performance in recent years, which has lagged behind the broader market, suggesting that a buyout might be attractive at a takeover premium.

The potential to transition Swatch to private ownership could, as noted by Bernstein analysts, unlock value by allowing the company to restructure and focus on its core objectives without public scrutiny.

Supporting this surge in stock price, Bernstein maintained an “outperform” rating on Swatch with a target price of CHF 222, indicating a 42% upside from recent trading levels. This target is based on Swatch’s strong brand equity and its untapped growth potential, which could be more effectively harnessed in a private setting, shielded from the short-term pressures of shareholders.

Moreover, the possibility of enhanced operational efficiency, particularly in addressing challenges related to the entry-level watch market and excess inventory, lends further weight to the idea of privatization.

As a result, shares of Swatch Group increased by 2.2% on Friday.