On Holding To Gain From Pace Of Product Introductions & Margin Expansion In Q1: Analyst

Zinger Key Points
  • Telsey Advisory Group rates On Holding Outperform with a $37 price target, citing robust Q1 product introductions and margins.
  • On's Q1 projections include 18.5% sales growth, driven by DTC and wholesale, with EBITDA and gross margin expansion anticipated.

Telsey Advisory Group analyst Cristina Fernández reiterated the Outperform rating on On Holding AG ONON, with an unchanged price forecast of $37.

On reports first quarter results on Tuesday, May 14, before the markets open.

According to Fernández, On will have had a strong start to the year given its pace of product introductions, including Cloudmonster 2, Cloudspark, and Cloudsurfer Trail in running, Cloudpulse in walking, Cloudtilt in training, and THE ROGER Clubhouse Pro in tennis.

In April, Cloudmonster Hyper was introduced, and the analyst sees a large focus on running heading into the Summer Olympics. 

In apparel, On also expanded its range with new training and tennis collections. Full-price selling seemed high during the first quarter, with On only sending emails about end of season discounts in January, a clearance month for retailers and brands, the analyst adds.

The analyst sees year-over-year sales growth of 18.5% to CHF 498 million, driven by DTC sales growth of 38% and wholesale growth of 9%.

Fernández projects EBITDA of CHF 76 million versus FS at CHF 74 million, equating to EBITDA margin expansion of ~80 bps to 15.3%. The analyst sees gross margin expansion of 176 bps to 60.0% vs. FS at 59.2% driven by the higher mix of DTC sales.

The analyst writes On is a unique story with significant runway still ahead as the company expands its product assortment to new  categories, like training, broadens its geographic reach in markets like China, and rolls out a higher number of owned stores.

Price Action: ONON shares are trading higher by 0.34% to $34.16 at last check Tuesday. 

Photo: courtesy of On Holding

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