On Wednesday, Citi initiated coverage on On Holding AG (NYSE: ONON), a premium global athletic footwear brand known for its Swiss engineering, with a Neutral rating and a price target of $65.00. The firm highlighted ONON's rapid sales growth in recent years, with revenue growing 26.12% in the last twelve months and impressive gross margins of 60.18%, as the company has been successful in capturing market share from more established industry players.
According to Citi, ONON's global brand awareness remains relatively low, with a market share of approximately 2.0%, compared to the industry leader Nike (NYSE:NKE), which holds a 34% share. Despite this, Citi sees an attractive opportunity for ONON to gain market share within its core footwear segment in existing markets. InvestingPro data reveals the company's strong financial health, with more cash than debt on its balance sheet and liquid assets exceeding short-term obligations.
The firm also identifies potential for ONON to expand into apparel, increase its presence in China, and grow its own store footprint. These opportunities could support a 20% or higher increase in top-line growth, significant EBIT margin expansion, and more than 30% growth in earnings per share over the next five years.
However, Citi notes that market expectations for ONON are already high, with shares trading at a forward 2025 earnings multiple of 56.4 times. This aligns with InvestingPro analysis, which indicates the stock is currently overvalued, trading at a P/E ratio of 120.72x.
Given these elevated expectations, Citi views the risk/reward profile for ONON's stock as balanced and suggests that investors may want to wait for a better entry point to own shares. For deeper insights into ONON's valuation and 17 additional ProTips, consider accessing the comprehensive Pro Research Report available on InvestingPro.
In other recent news, On Holding AG has seen a series of upbeat analyst reports following its impressive third-quarter earnings. The company reported net sales of CHF 636 million, marking a 33% year-over-year increase, primarily driven by strong demand across various regions. On Holding's robust performance led to an upward revision of its full-year 2024 net sales growth expectation from 30% to 32%, projecting net sales of at least CHF 2.29 billion.
TD Cowen, Raymond (NS:RYMD) James, and Williams Trading all raised their price targets for On Holding. The firms highlighted the company's strong performance and growth prospects, with TD Cowen and Raymond James maintaining a "Buy" rating and Williams Trading upgrading from a "Hold" to a "Buy" rating.
InvestingPro analysis reveals that On Holding maintains excellent financial health with strong liquidity ratios, having delivered returns of over 114% year-to-date. The company also reported an impressive gross margin of 60.6% and an EBITDA margin of 18.9% for the third quarter, surpassing the company's profit targets set for 2026.
In terms of international sales, brands like On Holding have seen stronger growth outside of North America, particularly in Asia. Despite potential disruptions due to potential China tariffs, leading global brands like On Holding are not expecting major impacts to their profit and loss statements. These recent developments reflect a positive trajectory for On Holding AG.
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