Swatch Group stock price has crashed in the past few years as the company goes through a double-whammy of slow Chinese demand and Donald Trump’s tariffs. The UHR share price was trading at CHF 140, down from the post-pandemic high of CHF 315. So, is it a bargain or a value trap?
Swatch Group is facing major headwinds
Swatch Group is one of the biggest players in the watch group, owning some notable names like Longines, Harry Winston, Omega, Hamilton, Swatch, and Blancpain.
The company, together with other major Swiss watch groups is going through a rough patch as demand from key countries wanes. In a recent report, the Federation of Swiss Watch Industry noted that the industry’s exports dropped by 5.6% in June to 2.2 billion francs. They dropped by 0.1% in the first six months of the year.
Swatch Group’s business has not been immune to this slowdown, especially now that it has not experienced a major hit since the release of MoonSwatch in 2022.
The main issue with Swatch is that, like other luxury groups, the Chinese market has deteriorated in the past few years. This weakness has also affected other top companies like Louis Vuitton, Burberry, and Kering.
Swatch is more exposed to this market, as it accounts for approximately 27% of its global sales. At the same time, the European market has continued to slow this year, while the United States is facing fresh headwinds.
Donald Trump announced a 39% tariff on Swiss goods, a move that will affect its business. For one, Swatch and other luxury watch companies will find it difficult to raise prices dramatically as doing that will impact its sales.
The US tariffs are also notable because it is its main growth engine, recording double-digit growth in the year’s first half.
Growth is decelerating
The most recent results showed that Swatch Group’s business was decelerating. Its net sales dropped by 7.1% to 3.05 billion francs, with the strong Swiss franc having a 113 million francs.
The operating profit plunged from CH 204 million last year to CH 64 million this year, while the net income imploded to 17 million francs
The management sees some improving trends from China, but analysts believe that any recovery will be slow.
At the same time, the management has resisted external pressure, including from its investors on how to boost growth. Most recently, Steven Wood, a top investor mounted a campaign to get in its board to push for it to move to the high-end segment but failed.
Any moves must be agreed by the Hayek family, which has a 40% voting right and has insisted that its strategy is the right one.
The ongoing slowdown will likely take time. However, like the other slowdowns, there are chances that it will rebound in the next few years.
Read more: Why the Swiss gold industry has rejected Swatch CEO’s US export tax proposal
Swatch Group stock price analysis
The weekly chart shows that the Swatch Group stock price has imploded in the past few years and its attempts to rebound have found substantial resistance.
It remains below the crucial support at CHF 196, its lowest swing in May 2022. Also, the stock has dropped below all moving averages, a sign that bears remain in the drivers seat.
Therefore, the Swatch share price will likely continue dropping, possibly to $100, and then start rising. A possible catalyst will be Donald Trump, who might decide to lower Swiss tariffs in the near term.
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