Watches of Switzerland Group PLC (LSE:WOSG) fell 3% to 707.6p after Jefferies downgraded the luxury watch retailer to 'hold' from 'buy', arguing the stock's powerful rerating has left little room for further valuation expansion.
The downgrade comes despite the broker raising its price target to 740p from 440p, implying just 4% upside from current levels.
Analyst James Grzinic said the shares now trade on 13.1 times calendar 2027 earnings, close to the top of the post-Covid range of 7 to 14 times, at a time when the US outlook will likely provide a reducing source of positive surprises.
A strong American backdrop has powered the rerating, and the broker expects full-year results on 14 July to confirm buoyant North American demand.
US revenue grew 22.7% in the last financial year, excluding currency moves, helped by consumers readily absorbing major price hikes and a 40% rally in the S&P 500 from its April 2025 lows.
But Jefferies warned that pricing support is fading.
Its monitor of US watch prices across Patek Philippe, Rolex, Cartier and Omega shows cumulative hikes of 12.6% since 2025, with momentum moderating since September and Patek actually cutting prices in February.
The UK offers no silver bullet either.
Despite extensive industry lobbying, the broker sees no evidence that duty-free shopping for tourists will be reintroduced, describing the prospect as very remote within this Parliament.
That leaves the mature UK business, roughly 45% of group revenues by 2027/28, exposed to a pressured domestic consumer.
The bank has shifted to a sum-of-the-parts valuation, applying 10 times earnings to the UK operation, in line with FTSE 250 retailers, and 16 times to the faster-growing US arm.
Its upside scenario points to 925p if acquisitions, new space and a return of VAT-free tourist shopping accelerate growth, while the downside case sits at 427p.
The broker nonetheless lifted its earnings forecasts, with per-share estimates up 13% for financial year 2027 on revenue of £1.97 billion.
Risks flagged include brands allocating less product, competition for acquisitions, new US tariffs and any shift in demand away from hard luxury.
