Tuesday, William Blair initiated coverage on On Holding AG (NYSE:ONON) stock, a footwear company, with an Outperform rating, highlighting the brand's momentum and innovative approach. The firm underscored On Holding's successful brand protection and product innovation, which are believed to set the stage for significant market share gains in the athletic brand sector.
The analysis by William Blair suggests that On Holding's momentum is expected to continue, contrary to typical trends that would anticipate a deceleration in growth after a four-year surge. The company's strategy of maintaining premium brand positioning and expanding through new categories and channels, especially with a focus on direct-to-consumer (DTC) sales and apparel, is projected to drive revenue growth above 25% over the next three years.
In addition to revenue growth, William Blair anticipates an improvement in margins and earnings growth exceeding 30% during the same period. This outlook is based on a shift in the company's sales mix toward higher-margin DTC and apparel segments, combined with the benefits of scaling operations. The firm finds the prospects of On Holding compelling at 19 times its 2025 adjusted EBITDA estimate.
Despite the positive outlook, William Blair acknowledges risks associated with the competitive athletic footwear market, which is dominated by a few major players. There is also concern regarding potential misalignment between the brand's internal technical perception by management and its external perception within the running community. This disconnect could lead to product development that fails to resonate with the intended audience.
InvestingPro Insights
On Holding AG (NYSE:ONON) is capturing attention with its innovative approach to athletic footwear and apparel. InvestingPro data reinforces the positive sentiment from analysts, showing a robust revenue growth of 46.64% in the last twelve months as of Q1 2023, with a gross profit margin standing tall at 59.56%. These figures suggest a strong financial backbone that supports the company's expansion strategies and product development.
InvestingPro Tips highlight that analysts are expecting net income and sales growth for On Holding in the current year. The company's impressive gross profit margins are also noted, indicating the effectiveness of its pricing strategy and cost control. With 6 analysts revising their earnings downwards for the upcoming period, it's essential for investors to keep an eye on future earnings reports. Additionally, the stock's high P/E ratio of 125.64 suggests that the market has high expectations for the company's future growth, despite the volatility in stock price movements.
For those looking to delve deeper into On Holding's financial health and future prospects, there are additional InvestingPro Tips available, which can be accessed with a subscription. Don't forget to use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. With these insights, investors can make more informed decisions regarding On Holding's potential for market share gains in the competitive athletic brand sector.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.