On Tuesday, On Holding AG (NYSE: ONON) saw its price target increased by Needham from $40.00 to $45.00. The firm has maintained its Buy rating on the stock. The adjustment follows On Holding's first-quarter performance, which surpassed expectations in sales and margins. The company's direct-to-consumer (DTC) sales and its Americas business maintained their momentum from the fourth quarter of 2023, despite holiday promotions typically impacting sales.
The footwear and apparel company reported a notable increase in gross margins, attributed to a strategic shift towards more DTC sales and efficient inventory management. On Holding has expressed satisfaction with its current quarter-to-date performance in both the DTC and Wholesale channels. This sentiment is particularly strong regarding key styles, with sales projections for the second quarter of 2024 expected to rise by approximately 25%. The forecast suggests a slight underperformance on a constant currency basis, with Wholesale anticipated to improve sequentially due to reduced impacts from exiting doors in the EMEA region. However, DTC is projected to see a marginal decline.
Looking ahead, On Holding anticipates further acceleration in the second half of 2024. This outlook is supported by easier year-over-year comparisons, a strong innovation pipeline, and the diminishing impact of foreign exchange headwinds. The company's raised estimates and price target reflect these positive developments.
Needham's report also highlighted an operational hiccup at On Holding's Atlanta warehouse, which has led to modest shortages in product allocation. The company is addressing this issue by air shipping some products from its Los Angeles distribution center to meet demand. Despite this challenge, Needham reiterated its confidence in On Holding, naming it a top pick among stocks.
InvestingPro Insights
As On Holding AG (NYSE: ONON) continues to impress with its latest performance figures, InvestingPro offers additional insights that could be of interest to investors. With a market capitalization of $9.78 billion and a robust revenue growth of 46.64% in the last twelve months as of Q4 2023, the company's financial health appears strong. The gross profit margin stands at an impressive 59.56%, underscoring the efficiency of its operations.
However, investors should note the company's high valuation multiples, with a P/E ratio of 125.64 and a Price/Book ratio of 8.11, indicating a premium price for the shares relative to earnings and book value. Despite recent volatility, with a one-week price total return showing a 9.76% decline, the company's stock is trading near its 52-week high, at 97.32% of this peak.
For those considering an investment in On Holding AG, InvestingPro Tips highlight several key points: analysts expect net income and sales growth this year, and the company's gross profit margins are notably high. On the other hand, the stock is trading at high earnings, EBIT, and EBITDA valuation multiples, and recent price movements have been quite volatile. Interested investors can explore these metrics further and find additional tips on InvestingPro, where there are 15 additional tips available. To enhance your investment research, use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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