BofA lifts On Holding stock price target to $75, maintains Buy

On Tuesday, BofA Securities updated its stance on On Holding AG (NYSE:ONON), increasing the price target to $75 from the previous $70 while reiterating a Buy rating on the shares. The adjustment comes as BofA Securities analyst Thierry Cota anticipates stronger organic sales growth for the company. Currently trading at $57.38, On Holding is considered overvalued according to InvestingPro Fair Value metrics, though analyst targets range from $45.01 to $71.27, reflecting diverse market opinions.

In a recent note, Cota explained the reasons behind the improved outlook. The forecast for full-year organic sales growth (OSG) was revised upward from 31% to 35%, exceeding the company’s guidance of greater than 28%. This revision is supported by a number of factors, including a lower comparative base in the second quarter of 2024 and expected price increases in the United States starting in July. The optimistic outlook aligns with the company’s track record, as InvestingPro data shows impressive revenue growth of 29.36% over the last twelve months, with a remarkable gross profit margin of 60.63%.

The analyst also pointed to a projected increase in carryover growth boost from 12% to 18% in the second half of the year, as per BofA Securities’ estimates. Furthermore, Cota mentioned management’s indications that their guidance might be conservative compared to the current trend in orders. InvestingPro analysis reveals several positive indicators, including strong financial health with an overall score of "GREAT" and impressive returns, with the stock up nearly 87% over the past year. Subscribers can access 16 additional ProTips and a comprehensive Pro Research Report for deeper insights into On Holding’s performance metrics.

On Holding AG’s stock adjustment reflects the company’s robust performance and the analyst’s confidence in its continued growth trajectory. The gradual slowdown in OSG from 40% in the first quarter to 30% in the fourth quarter is seen as a natural progression rather than a concern.

The price hike, which is expected to be low to mid-single-digit, follows an earlier increase implemented in the first half at a group-wide level. This strategy is anticipated to contribute positively to the company’s revenue growth in the United States.

BofA Securities’ revised price target and sustained Buy rating on On Holding AG underscore a positive outlook for the company’s financial performance in the upcoming quarters.

In other recent news, On Holding AG reported a robust start to the year with a 40% constant currency growth in the first quarter, prompting an upward revision of its annual revenue growth projection to over 28%. The company’s adjusted EBITDA reached CHF 120 million, surpassing both consensus estimates and internal forecasts. Analysts from Evercore ISI, BTIG, and Needham have responded positively, raising their price targets to $70, $70, and $62, respectively, while maintaining favorable ratings. Citi also upgraded On Holding AG from Neutral to Buy, albeit with a reduced price target of $60, citing concerns over foreign exchange rates and tariffs impacting future margins. Despite these challenges, Citi noted the brand’s strong market presence and growth potential.

Additionally, On Holding AG announced a transition to a single CEO structure, with Martin Hoffmann set to take over as CEO on July 1. The company is actively searching for a new CFO while introducing new senior roles to enhance innovation and operational capacity. BTIG maintained its Buy rating, indicating confidence in the leadership transition. The strategic changes in leadership are seen as a natural progression for the company’s expansion. These developments reflect On Holding AG’s continued momentum and its strategic positioning within the market.

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