SWGAF - Swatch is sized up by Morgan Stanley as China re-opening flips the script

Swatch Group AG ( OTCPK:SWGAF ) was upgraded by Morgan Stanley on Wednesday to an Equal-weight rating after the Swiss watchmaker stock was set by the firm at Underweight.

Analyst Edouard Aubin noted that within the European luxury sector, Swatch is one of the most exposed to Chinese nationals with an estimated 50% of sales worldwide pre-Covid and 27% in 2022.

"We think Swatch Group's earnings outlook in 2023 should benefit from demand recovery of the Chinese cluster. The impact on Swatch profits by topline recovery will be compounded by the group's high vertical integration. That said, high exposure to the low-end segment, outperformance of privately owned groups and accelerating underperformance of multiple SG brands is creating significant operational inefficiencies."

Shares of Swatch ( OTCPK:SWGAF ) gained 2.55% in Zurich trading on Tuesday.

Seeking Alpha Marketplace author Manika Premsingh issued a Hold rating on Swatch last month.

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