Why Swatch stock surged this week

Investing.com -- Swatch Group'd (SIX:UHR ) stock surged this week largely due to increased speculation about a potential take-private scenario following comments from its CEO, Nick Hayek, as per analysts from Bernstein. 

In a recent interview, Hayek remarked that privatizing Swatch "would be a nice thing to do," especially given the company's historically low share prices. 

Although he clarified later that no such plans were currently in motion, the mere suggestion that such a move was conceivable sparked significant investor interest. 

His comments revived long-standing discussions about Swatch’s prospects as a private company, especially given its underperformance in public markets.

Bernstein analysts had previously discussed the rationale for such a move, suggesting that a delisting could provide the Hayek family—long-time controllers of Swatch—the flexibility to implement necessary changes outside the pressures of the public market. 

Bernstein also pointed to the weak performance of Swatch’s stock in recent years, with the stock underperforming the broader market, as an incentive for a potential buyout at a takeover premium. 

The possibility of taking Swatch private could, as Bernstein analysts noted, unlock value by allowing the company to restructure and refocus without public scrutiny.

Further fueling the surge was Bernstein's outlook on Swatch’s potential, maintaining an "outperform" rating on the stock with a target price of CHF 222, representing a 42% upside from the recent trading price. 

This target reflects Swatch’s solid brand equity and untapped growth potential, which could be more effectively realized in a private setting, free from the short-term demands of public shareholders. 

Additionally, the potential for improved operational efficiency, particularly in addressing Swatch’s challenges in the entry-level watch market and its overgrown inventory, adds further credence to the possibility of a privatization.

Shares of Swatch Group were trading higher at 2.2% on Friday.

Source: Investing.com