Friday, UBS analysts maintained their Buy rating and a $63.00 price target on On Holding AG (NYSE: ONON), predicting substantial growth for the athletic wear brand. The firm forecasts that On Holding will experience a roughly 22% five-year sales compound annual growth rate (CAGR) and an approximately 43% five-year earnings per share (EPS) CAGR.
Supporting these projections, InvestingPro data shows the company's impressive 28% revenue growth forecast for 2024, along with robust gross profit margins of 60%. UBS anticipates that these growth rates will position On as one of the fastest-growing athletic wear brands globally.
UBS's positive outlook is partly based on the results of the UBS Evidence Lab's 10th annual global athletic wear survey, which indicates significant potential for brand growth. The survey shows that On's global aided brand awareness is currently at 13%, substantially lower than leading brands such as Nike (NYSE:NKE) at 91%, Puma (OTC:PMMAF) at 74%, and Jordan at 59%.
However, On's brand awareness has been on an upward trajectory, increasing from 5% in 2021 to 6% in 2022, 9% in 2023, and 13% in 2024. This growth potential is reflected in the company's market performance, with InvestingPro showing a remarkable 103% return over the past year.
The analysts believe that the growing brand recognition will be a critical factor in On Holding's ability to capture more market share by 2025. The consistent increase in awareness over the past years suggests that the market's understanding and recognition of the On brand are expanding at an accelerating rate.
UBS argues that On Holding's stock will likely approach the firm's price target as the company continues to deliver strong earnings reports. These reports are expected to progressively persuade a skeptical market of On's potential to emerge as a leading athletic wear brand on the global stage.
According to InvestingPro, the company maintains a "GREAT" financial health score, though investors should note its relatively high beta of 2.3, indicating above-average market volatility. For deeper insights, including 17 additional ProTips and comprehensive valuation metrics, explore the full Pro Research Report available on InvestingPro.
In summary, UBS's analysis is founded on the belief that On Holding's rapidly rising brand awareness, coupled with strong projected sales and EPS growth, justifies a premium multiple for the company's stock. They suggest that as On continues to demonstrate solid financial performance, the market will increasingly acknowledge its value.
In other recent news, On Holding AG has been the subject of numerous analyst upgrades and price target revisions following remarkable third-quarter earnings. The company reported net sales of CHF 636 million, a 33% increase from the previous year, primarily driven by strong demand across various regions. This robust performance led to an upward revision of On Holding's full-year 2024 net sales growth expectation from 30% to 32%, forecasting net sales of at least CHF 2.29 billion.
TD Cowen, Raymond (NS:RYMD) James, and Williams Trading all increased their price targets for On Holding, highlighting the company's strong performance and growth prospects. TD Cowen and Raymond James maintained a "Buy" rating, while Williams Trading upgraded from a "Hold" to a "Buy" rating.
Citi initiated coverage on On Holding with a Neutral rating, highlighting the company's rapid sales growth and impressive gross margins. Despite a relatively low global brand awareness, Citi sees potential for On Holding to expand its market share within its core footwear segment and to potentially expand into apparel and increase its presence in China.
Bernstein's analysis revealed optimism among sportswear brands for the upcoming holiday quarter, particularly for premium brands like On Holding, which has demonstrated impressive performance with a revenue growth of 26% and industry-leading gross margins of 60%.
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