On Tuesday, Goldman Sachs reaffirmed its Buy rating and a $47.00 stock price target for On Holding AG (NYSE:ONON). The firm's assessment followed On Holding's second-quarter financial results, which surpassed market expectations.
On Holding's adjusted EBITDA for the quarter reached CHF 90.8 million, a 5.3% increase over the FactSet consensus of CHF 86.2 million. This performance was attributed to robust net sales of CHF 567.7 million, marking a year-over-year increase of 27.8% and a currency-adjusted (cFX) growth of 29.4%, slightly above the CHF 562 million and 26% year-over-year growth anticipated by consensus.
The company's group gross margin reported was 59.9%, a 40 basis points improvement year-over-year, which was slightly below the expected 60.1% according to FactSet consensus. Adjusted EBITDA margins were favorable at 16%, surpassing the consensus estimate of 15.3%.
On Holding also noted a decrease in net working capital by 5.3% year-over-year at the end of the second quarter, which was a significant change from the 14.3% increase seen relative to the fourth quarter of the previous year.
Sales growth varied by region, with EMEA cFX sales up by 22.2%, the Americas increasing by 25.8%, and APAC experiencing a significant surge of 84.7% year-over-year. These figures compared to consensus estimates of 20.1% for EMEA, 29.6% for the Americas, and 61.6% for APAC. The direct-to-consumer (DTC) channel grew by 28.1%, while the wholesale channel saw a 27.6% increase, compared to consensus expectations of 35.9% and 20.2%, respectively.
Looking ahead, On Holding AG reiterated its full-year 2024 guidance, expecting currency-adjusted sales growth of at least 30%, consistent with the Visible Alpha Consensus Data projection of 31.1%. The company anticipates net sales to reach at least CHF 2.26 billion, a slight adjustment from the previous CHF 2.29 billion and below the FactSet consensus of CHF 2.30 billion.
Gross margin targets are around 60%, in line with the consensus of 60.3%, and an adjusted EBITDA margin between 16% to 16.5%, with consensus at the higher end of the range. The firm concluded that, all factors being constant, they expect the consensus for the full-year 2024 adjusted EBITDA to remain around CHF 378 million.
In other recent news, On Holding AG has seen a flurry of activity with analyst firms adjusting their price targets and ratings. TD Cowen sustained a Buy rating for On Holding AG, reiterating a $48.00 price target, while Goldman Sachs increased the price target from $41.00 to $47.00, maintaining a Buy rating.
Bernstein initiated coverage with an Outperform rating and a $50.00 price target, and Telsey Advisory Group adjusted its price target from $40.00 to $47.00, retaining an Outperform rating.
These adjustments are informed by recent developments, including strong first-quarter sales that surpassed expectations, largely due to robust demand in the direct-to-consumer segment. Furthermore, On Holding AG reaffirmed its fiscal year 2024 guidance, projecting net sales to reach around CHF 2.29 billion.
In addition to financial highlights, On Holding announced the appointment of Laura Miele, President of Electronic Arts (NASDAQ:EA) Entertainment & Technology, to its Board of Directors. The company also revealed partnerships with high-profile ambassadors, such as actress Zendaya and singer-songwriter FKA Twigs, to diversify its offerings and enhance its brand image.
On Holding AG is also preparing for significant brand events, including new product technology launches aligned with the upcoming Paris Olympics. These strategies are expected to enhance brand recognition and accelerate revenue growth.
InvestingPro Insights
Following Goldman Sachs' optimistic stance on On Holding AG (NYSE:ONON), recent data from InvestingPro further complements the company's financial narrative. On Holding's market capitalization stands at a robust $12.61 billion, reflecting investor confidence in the company's market position. The firm's gross profit margins remain impressive at nearly 60%, highlighting efficient operations and a strong pricing strategy. This is particularly relevant as the company navigates a competitive landscape, maintaining its ability to generate significant value from sales.
InvestingPro Tips indicate that On Holding holds more cash than debt, suggesting a solid balance sheet that can weather potential market fluctuations. Moreover, the company is expected to see net income growth this year, aligning with the positive sales growth projections discussed in the article. For investors seeking more nuanced analysis, InvestingPro offers a suite of additional tips, with 17 more insights available that delve into the financial health and market potential of On Holding AG.
With a forward-looking P/E ratio of 85.02, the company trades at a high earnings multiple, which may indicate investor expectations of continued growth and profitability. However, it's worth noting that this also suggests a premium valuation, which could be a point of consideration for value-focused investors. As the company progresses, the InvestingPro platform provides a fair value estimate, which currently stands at $38.16, offering a data-driven perspective on the stock's valuation.
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