Jefferies starts Watches of Switzerland at 'buy'

Jefferies initiated coverage of Watches of Switzerland on Thursday with a ‘buy’ rating and 470p price target, saying it’s a proxy play on the more attractive end of the luxury watch market and is well-placed to perform in the underdeveloped US market.

Recent results and upgraded guidance confirm resilience in the UK, Jefferies said.

"There is more upside in spite of the recent rerating as outperformance will continue and the investment case is not well known," it added.

The bank also highlighted the company’s relationship with Rolex and the expansion opportunity in the US. The top seven brands, led by Rolex, account for 74% of sales, it said.

"The group primarily sells high-end luxury watches which accounted for 84% of sales in FY20: Rolex is the key brand for and accounts for circa 54% of group sales, and growing.

"Whilst this implies WOSG is de facto a Rolex proxy, there is more to the name than meets the eye as it continues to increase profile and share via selling space accretion, store elevation, improving clienteling and dominance in digital."