Analyst David Roux of Bank of America Securities reiterated a Sell rating on On Holding AG (ONON – Research Report), with a price target of $21.00.
David Roux has given his Sell rating due to a combination of factors that raise concerns about On Holding AG’s (ONON) future performance. Although On Holding outperformed in terms of adjusted EBITDA in the fourth quarter, the report indicates that the company missed growth targets and now faces a challenging outlook for 2024. Despite the company being recognized for innovation, Roux expresses doubt about On Holding’s ability to achieve operating leverage and meet margin expectations in the medium term. Furthermore, the valuation of On Holding’s stock seems particularly high in comparison to its peers, with a reported earnings multiple that is almost double the industry average, suggesting a greater risk for potential downside.
On Holding is targeting aggressive growth in 2024, with ambitions for over 30% constant currency growth. However, the guidance provided by the company necessitates a significant acceleration in growth throughout the year, which may be overly optimistic given its recent performance in Switzerland and strategic shifts. The company’s direct-to-consumer and store rollout strategies are expected to drive some operating leverage, but this, too, is seen as ambitious by Roux. The final assessment is that, given the current market valuation and the operational risks involved, the stock’s prospects are more likely to disappoint, prompting the recommendation to sell.
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On Holding AG (ONON) Company Description:
On Holding AG is a premium performance sports brand rooted in technology, design, and impact. Its shoe, apparel, and accessories products are designed primarily for athletic use, casual, or leisure purposes. It does not manufacture the products or the raw materials and rely instead on third-party suppliers and contract manufacturers.
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