On Tuesday, Stifel reiterated a Buy rating on shares of On Holding AG (NYSE:ONON), maintaining the price target at $59.00. The firm's analysis highlights that On Holding's third-quarter 2024 revenue and adjusted EBITDA surpassed estimates. The company reported revenue of CHF 635.8 million and an adjusted EBITDA of CHF 120.1 million, exceeding Stifel's projections of CHF 613.7 million in revenue and CHF 106.9 million in adjusted EBITDA, as well as surpassing the street's expectations of CHF 618.2 million and CHF 108.5 million respectively.
This performance, according to Stifel, indicates a 60% incremental margin on the top-line beat. A significant factor contributing to this success was the direct-to-consumer (DTC) revenue, which surged by 50.7% on a constant currency basis, an acceleration from the 30.4% growth observed in the second quarter of 2024. The firm also noted On Holding's disciplined approach to maintaining full-price sales.
On Holding AG's gross margin expanded by 70 basis points year over year, reaching a record 60.6%, which was higher than Stifel's estimate of 60.0%. The company has also increased its full-year 2024 guidance, now expecting revenue of at least CHF 2.29 billion, up from the previous forecast of at least CHF 2.26 billion. Gross margin projections have been raised to 60.5% from 60.0%, and the adjusted EBITDA margin is anticipated to be at the high end of the previously estimated 16.0-16.5% range.
The upward revision in guidance suggests a slightly stronger top-line and gross margin contribution while accounting for increased operating expenses anticipated in the fourth quarter of 2024. Stifel attributes On Holding's strong performance to robust direct-to-consumer sales momentum, a clear strategy for investment in product categories and regions, and efficient inventory management, which saw an 18% year-over-year reduction.
Stifel's positive outlook on On Holding is further solidified by these factors, and the firm intends to update its estimates following the company's conference call.
InvestingPro Insights
On Holding AG's (NYSE:ONON) strong performance, as highlighted in Stifel's analysis, is further supported by real-time data from InvestingPro. The company's impressive revenue growth of 28.49% over the last twelve months aligns with Stifel's observations of surpassing revenue estimates. This growth is complemented by a robust gross profit margin of 59.97%, which is consistent with the record 60.6% margin mentioned in the article.
InvestingPro Tips reveal that On Holding "holds more cash than debt on its balance sheet" and has "liquid assets exceed short term obligations," indicating a strong financial position that supports the company's growth strategy and investment plans. Additionally, the tip that "analysts anticipate sales growth in the current year" corroborates the increased full-year guidance mentioned in the article.
It's worth noting that On Holding's stock has shown a "significant return over the last week" and a "strong return over the last three months," with a 33.27% price total return over the past three months. This performance reflects investor confidence in the company's recent results and future prospects.
For investors seeking a more comprehensive analysis, InvestingPro offers 20 additional tips for On Holding, providing deeper insights into the company's financial health and market position.
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