On Tuesday, Bernstein initiated coverage on shares of On Holding AG (NYSE:ONON), assigning an Outperform rating and setting a price target of $50.
The firm's analysis suggests that despite the perception of On's Running business reaching its peak in key global cities, there is significant growth potential ahead. The brand is recognized for having a low single-digit percentage market share, limited awareness, and sparse retail distribution across major markets.
The firm projects a compound annual growth rate (CAGR) of 28% for On Holding through 2026, which is slightly more optimistic than management's targets and the consensus. This growth expectation is primarily driven by a 40% increase in wholesale distribution, attributed to the addition of new retail doors and enhanced revenue per door. Additionally, the firm anticipates over double the growth in brand awareness, particularly in newer markets like the United States.
Bernstein's outlook for On Holding is rooted in the company's current market positioning and the strategies outlined for expansion. The firm's forecast hinges on the brand's ability to capitalize on its existing market share and to significantly increase its retail presence and consumer awareness.
In other recent news, On Holding AG has experienced several significant developments. The Swiss sportswear company reported first-quarter sales that exceeded expectations, primarily driven by robust demand in the direct-to-consumer segment. This positive performance led to the reaffirmation of its fiscal year 2024 guidance, with net sales projected to reach around CHF 2.29 billion, a 28% increase from previous projections.
In response to these strong results, several analyst firms have adjusted their price targets for On Holding AG. Telsey Advisory Group raised its target from $40.00 to $47.00, maintaining an Outperform rating. KeyBanc maintained an Overweight rating with a $40.00 price target, Truist Securities increased its target to $34 from $30, maintaining a Hold rating, and Baird raised its target to $46 from $38, also retaining an Outperform rating.
In addition to financial highlights, On Holding AG announced the appointment of Laura Miele, President of Electronic Arts (NASDAQ:EA) Entertainment & Technology, to its Board of Directors. The company also revealed its partnership with high-profile ambassadors, such as actress Zendaya and singer-songwriter FKA Twigs, as part of its strategy to diversify its offerings and enhance its brand image. Furthermore, On Holding AG is preparing for significant brand events, including new product technology launches aligned with the upcoming Paris Olympics.
InvestingPro Insights
On Holding AG (NYSE:ONON) is currently demonstrating financial metrics that reflect both its growth potential and market challenges. With a market capitalization of $13.62 billion and a trailing twelve months revenue growth of 33.66%, the company is showing significant expansion in its financials. Its gross profit margin stands at an impressive 59.87%, indicating strong profitability relative to sales. However, investors should note the company's P/E ratio is at a lofty 88.64, reflecting a high valuation relative to near-term earnings. This is further emphasized by a P/E ratio of 96.47 for the last twelve months as of Q1 2024, suggesting that market expectations are high for future earnings.
From an operational standpoint, On Holding's cash flows can sufficiently cover interest payments, and its liquid assets exceed short-term obligations, providing a degree of financial stability. Additionally, InvestingPro Tips indicate that On Holding is expected to see net income growth this year, with analysts anticipating sales growth in the current year. However, the company is trading at a high earnings multiple and a high P/E ratio relative to near-term earnings growth, which could be a concern for value-focused investors.
For those interested in a deeper dive into On Holding's financial outlook, there are 22 additional InvestingPro Tips available, offering a comprehensive analysis that could guide investment decisions. Subscribers can access these insights by visiting https://www.investing.com/pro/ONON. Moreover, users can benefit from a special offer using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.