On Tuesday, Goldman Sachs updated its outlook on shares of On Holding AG (NYSE:ONON), increasing the price target from $41.00 to $47.00 while keeping a Buy rating on the company's stock. The firm anticipates a strong performance for the company in the second half of 2024, with expectations of a 33% increase in constant currency (cFX) sales and a rise in gross margin by 40 basis points to around 60%.
The firm's analysis suggests that adjusted EBITDA margins will improve by 120 basis points to 15.3%, contributing to an estimated €88 million in adjusted EBITDA for the second half of the year.
Growth is expected to be particularly strong in direct-to-consumer (DTC) sales, which are projected to rise by 35% in constant currency terms, while wholesale is forecasted to grow by 29.5%. This shift is predicted to increase the DTC sales mix by 160 basis points to 38.4%.
These projections align with Goldman Sachs' full-year expectations for On Holding AG, which include a 31.5% increase in constant currency sales (28% growth in Swiss Franc terms) and an EBITDA margin expansion of 100 basis points year-over-year to 16.5%. The firm also forecasts that the DTC sales mix will improve by 200 basis points year-over-year to approximately 39% for the full year.
Goldman Sachs' positive outlook is based on the company's anticipated financial results for the second quarter of 2024, which are due to be reported in August. The company's performance in the latter half of the year is expected to drive significant earnings before interest, taxes, depreciation, and amortization (EBITDA).
In other recent news, Swiss sportswear company On Holding AG has experienced noteworthy developments. The company exceeded first-quarter sales expectations, largely due to strong demand in the direct-to-consumer segment. The firm also reaffirmed its fiscal year 2024 guidance, projecting net sales to reach around CHF 2.29 billion, a 28% increase from previous estimates.
In an effort to diversify its offerings, On Holding has enlisted high-profile ambassadors like actress Zendaya and singer-songwriter FKA Twigs. The company has also made moves to enhance its in-store customer experience, working with retailers like Foot Locker (NYSE:FL) and Dick's Sporting Goods (NYSE:DKS) to increase its presence.
On the governance front, Laura Miele, President of Electronic Arts (NASDAQ:EA) Entertainment & Technology, has joined On Holding's Board of Directors. Miele's experience in managing international teams and shifting company operations to digital delivery is expected to be a valuable asset.
Analyst firms have adjusted their price targets for On Holding following the strong first-quarter results. KeyBanc maintained an Overweight rating with a $40.00 price target, while Truist Securities increased its price target to $34 from $30, maintaining a Hold rating.
Baird raised its price target to $46 from $38, maintaining an Outperform rating, and Telsey Advisory Group increased its price target to $40 from $37, also retaining an Outperform rating.
In other company news, On Holding is preparing for significant brand events, including new product technology launches aligned with the upcoming Paris Olympics. The company's strategies are expected to enhance brand recognition and accelerate revenue growth.
InvestingPro Insights
Goldman Sachs' upbeat assessment of On Holding AG (NYSE:ONON) is further supported by key financial metrics and insights from InvestingPro. With a market capitalization of $12.12 billion, On Holding AG demonstrates a robust financial position, underscored by a gross profit margin of nearly 60% for the last twelve months as of Q1 2024. These figures not only reflect the company's efficiency but also its ability to sustain profitability.
InvestingPro Tips highlight the company's financial health, with On Holding AG holding more cash than debt on its balance sheet, and analysts expecting net income and sales growth in the current year. Moreover, the company's cash flows are more than sufficient to cover interest payments, and liquid assets surpass short-term obligations, indicating a strong liquidity position.
For investors considering On Holding AG's stock, it's worth noting that the company is trading at a high earnings multiple, with a P/E ratio of 91.03. While this suggests a premium valuation, the anticipated sales growth and impressive gross profit margins may justify the current pricing to some investors.
Furthermore, with the stock experiencing a large price uptick over the last six months and analysts predicting profitability for the year, On Holding AG presents an intriguing opportunity for those confident in its growth trajectory.
For more detailed analysis and additional InvestingPro Tips on On Holding AG, interested readers can explore the insights available on Investing.com's Pro platform. There are 17 additional InvestingPro Tips that could provide deeper context into the company's financials and projections. To access these insights and enhance your investment research, use coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
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