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On Tuesday, Raymond (NSE:RYMD) James reaffirmed a strong buy rating and a $68.00 price target for On Holding AG (NYSE:ONON), a $15.3 billion market cap sportswear company, following its fourth-quarter earnings report for the fiscal year 2024. According to InvestingPro data, the company maintains impressive gross profit margins and holds more cash than debt on its balance sheet. The sportswear firm exceeded expectations with a 36% increase in revenue, surpassing both Raymond James and wider market predictions of a 33% rise. Gross margin (GM%) improved by 168 basis points to 62.1%, outdoing Raymond James’s anticipation by 125 basis points and market estimates by 120 basis points. This performance aligns with the company’s strong financial health, earning a "GREAT" overall score from InvestingPro, which offers 14 additional exclusive insights about ONON’s financial position. Earnings before interest, taxes, depreciation, and amortization (EBITDA%) also saw a slight increase of 30 basis points to 16.4%, contrary to Raymond James’s projection of a 60 basis point decrease but in line with market expectations of a 25 basis point increase.
The performance in the EMEA and Asia-Pacific regions was notably strong, while the Americas saw a 28% growth, which was slightly below the 32% anticipated by both Raymond James and market analysts. The direct-to-consumer (DTC) channel, considered crucial by Raymond James, outperformed forecasts with a 43% growth compared to the expected 39%.
Looking ahead to the fiscal year 2025, On Holding AG has set its revenue growth target at 27% year-over-year, which is slightly below the consensus estimates of 29% by Raymond James and 28% by the market. However, the company has a track record of surpassing revenue expectations, having done so in 13 out of 14 quarters since becoming a publicly traded entity. On Holding AG typically beats its guidance by about 2% each quarter. The company’s gross margin is projected to remain approximately flat year-over-year due to the benefits of the DTC channel and foreign exchange headwinds. The EBITDA margin is expected to increase by 30 to 80 basis points, reaching 17.0-17.5%, which aligns closely with market expectations of 17.5% and the company’s own long-term targets established during its 2023 Investor Day, aiming for 18% margins by 2026.
Despite the guidance for 2025 being below consensus, Raymond James suggests that given On Holding AG’s consistent history of outperforming its forecasts, there is potential for upside in the future. The stock currently trades at a premium valuation multiple, with InvestingPro analysis indicating the stock is slightly overvalued at current levels. Investors seeking deeper insights can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers, which provides detailed analysis of ONON’s valuation metrics and growth prospects.
In other recent news, On Holding AG is preparing to report its fourth-quarter earnings for 2024, with Piper Sandler analysts expecting a slight beat due to higher gross margins. UBS has adjusted its price target for On Holding to $65.00, maintaining a Buy rating, and anticipates a 5 cents earnings per share supported by strong sales and margins. Truist Securities continues to support On Holding with a Buy rating and a $61.00 target, despite recent stock declines, citing sustained consumer demand and positive U.S. Direct-to-Consumer business performance. KeyBanc Capital Markets raised its price target to $68, maintaining an Overweight rating, driven by strong brand momentum and anticipated product innovations. Citi reiterated a Neutral rating with a $65.00 target, noting the company’s strong positioning in the footwear market and positive management insights from a recent conference. Analysts from Piper Sandler and UBS have differing views on the 2025 sales growth guidance, with Piper Sandler expecting a more conservative 25% growth, while UBS anticipates at least 26%. KeyBanc highlights On Holding’s operational improvements and new distribution center as factors that could alleviate previous challenges. Overall, On Holding’s strategic initiatives and market positioning have led to a mix of analyst ratings and price targets, reflecting varied expectations for the company’s financial performance.
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