On Wednesday, Telsey Advisory Group increased its price target on shares of On Holding AG (NYSE: ONON), a sportswear company, lifting it from $53.00 to $62.00, while maintaining an Outperform rating.
"On's global brand awareness took a step forward in 3Q24 helped by marketing and new products, allowing On to exceed sales expectations for the quarter, get a strong start to 4Q24, and raise its 2024 sales guidance," said Telsey analysts in a note.
On Holding AG not only reported a strong start to the fourth quarter of 2024 but also raised its sales guidance for the year. The company's direct-to-consumer (DTC) sales penetration saw a 450 basis point shift, contributing to better-than-expected gross margin and EBITDA results for the quarter. Consequently, On also upgraded its full-year guidance. This performance is seen as a testament to On's successful execution during the third quarter, as the company was able to meet demand and alleviate supply chain pressures effectively.
The company's third-quarter results showcased a gross margin of 60.6% and an EBITDA margin of 18.9%, figures that not only exceeded the quarter's expectations but also surpassed On's profit targets set for 2026. The targets were a gross margin of "at least 60%" and an EBITDA margin of 18%. These results have bolstered confidence in On's potential to meet its long-term profitability goals.
Looking ahead to 2025, On Holding AG is poised to continue its brand momentum through various strategic initiatives. These include launching new products such as Cloudsurfer 2 in the running category and Cloud 6 and Cloudzone in lifestyle, opening 20-25 new stores, expanding wholesale doors by 5%-6%, increasing apparel penetration, and continuing aggressive marketing campaigns.
The revised price target of $62 is based on applying an enterprise value to sales multiple of approximately 4.75 times to Telsey's 2026 revenue estimate of CHF 3.6 billion for On Holding AG. This reflects the firm's optimism about the company's future performance and growth prospects.
In other recent news, BTIG upgraded On Holding AG stock from Neutral to Buy, reflecting confidence in the company's current momentum and future earnings potential. The firm anticipates that On Holding will continue to see growth, especially as it benefits from a shift towards more DTC sales. Goldman Sachs (NYSE:GS) also revised its full-year 2024 and 2025 constant currency sales growth estimates to 31.9% and 25.4%, respectively, in light of these results.
Truist Securities raised its price target for On Holding AG to $61.00, citing strong demand and growth acceleration.
InvestingPro Insights
On Holding AG's recent performance and future outlook align well with several key metrics and insights from InvestingPro. The company's impressive revenue growth of 32.32% in Q3 2024 supports the strong quarterly performance mentioned in the article. Additionally, On's gross profit margin of 60.18% for the last twelve months as of Q3 2024 closely matches the 60.6% reported for the third quarter, underscoring the company's consistent profitability.
InvestingPro Tips highlight that On Holding AG "holds more cash than debt on its balance sheet" and has "liquid assets exceed short term obligations," which suggests a strong financial position to support its expansion plans and marketing initiatives. The tip indicating "analysts anticipate sales growth in the current year" aligns with On's raised sales guidance for the year.
It's worth noting that InvestingPro offers 20 additional tips for On Holding AG, providing investors with a comprehensive analysis of the company's financial health and market position. These insights can be particularly valuable given On's recent performance and the optimistic outlook presented by analysts.
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