Watches of Switzerland (LON: WOSG) Up 50% From YTD Lows, Still Cheap?

The Watches of Switzerland share price (LON: WOSG) has experienced quite the year, having lost 28% on a YTD basis despite the recent rally. After gains of 50% from the 52 week low of 324p set in May, this level could now be firmly in the rear-view if recent analysis is correct.

Deutsche Bank upgraded WSOG's shares to a Buy rating, up from Hold, arguing that the company's stock remains currently undervalued and markets have responded in support.

Watches of Switzerland Group is the UK's largest luxury watch retailer, and with today's 3% gain coming on the back of a significant 11% gain in Thursday's session, the interest in the stock is increasing.

Deutsche Bank analyst Alison Lygo told investors that she believes the market is overlooking the stability of Watches of Switzerland's earnings, which are largely driven by the supply of Rolex watches.

Despite the company's low visibility as a retailer, Lygo sees significant potential for growth in the coming years, particularly in the United States.

“Whilst we don't believe the business should be valued as a luxury proxy, as it was during covid, currently trading on 9x PE we see it as being valued as a low visibility retailer, which in our view, overlooks a stable earnings underpin from the supply driven (Rolex) business,” said Lygo.  

Deutsche Bank highlighted several opportunities for Watches of Switzerland's growth, including consolidation in the US market, increased brand awareness in the US, and expansion into branded jewelry.

Although the analyst does not expect a near-term rebound in demand-driven sales, she believes that the company's long-term prospects are promising.

“We view shares trading on Cal-25 9x as too cheap for a business that offers 12% EPS CAGR from FY26 with opportunity for growth beyond,” Lygo added.