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On Tuesday, Telsey Advisory Group analyst Cristina Fernandez maintained an Outperform rating on On Holding AG (NYSE:ONON) shares, with a steadfast price target of $67.00. The Swiss athletic footwear company, currently valued at $15.32 billion, has earned a "GREAT" financial health score according to InvestingPro analysis, demonstrating strong fundamentals despite its stock’s recent -12.63% year-to-date performance. Fernandez’s evaluation followed On Holding’s robust performance in 2024, surpassing several key financial benchmarks. The company reported a 36% increase in sales, exceeding both Telsey Advisory Group’s (TAG) projection of 35% and FactSet’s (FS) consensus of 33%. Additionally, On Holding achieved a record gross margin of 62.1%, outpacing TAG’s estimate of 61.4% and FS’s forecast of 61.5%. This impressive margin performance aligns with InvestingPro data showing consistent profitability and strong liquidity, with a current ratio of 2.91 indicating robust short-term financial health.
On Holding’s success was attributed to a 43% surge in direct-to-consumer (DTC) sales, which contributed to a 260 basis point rise in sales mix to 48.8%. The company’s wholesale sales grew by 29%, compared to TAG’s estimate of 27% and FS’s 26%. Notably, apparel sales accelerated sharply to 76% growth, a significant jump from 34% in the third quarter of 2024.
Looking ahead, On Holding provided revenue and gross margin guidance for 2025 that fell slightly short of expectations. The company anticipates revenue growth of 27%, aiming for "at least 2.94 billion CHF," which is modestly below TAG’s prediction of 28% to CHF 2.96 billion and FS’s 29% to CHF 2.97 billion. The expected gross margin is forecasted at 60.5%, slightly under TAG’s 60.8% and FS’s 60.7%. However, the adjusted EBITDA margin guidance aligns with expectations, projected at 17.0%-17.5%, which at the midpoint equates to adjusted EBITDA of CHF 507 million.
Fernandez noted that On Holding has a history of issuing conservative guidance that it often exceeds. This was evidenced in 2024 when the company’s revenue growth of 29% outperformed the initial guidance of 26%, the gross margin of 60.6% was higher than the starting forecast of 60.0%, and the adjusted EBITDA margin of 16.7% surpassed the initial range of 16.0%-16.5%. Furthermore, On Holding has indicated a promising start to 2025, with expectations for higher revenue growth in the first half of the year, bolstered by new product launches like the Cloud 6 in February. Consequently, Fernandez does not anticipate a downward revision of FS consensus estimates. For investors seeking deeper insights, InvestingPro offers comprehensive analysis of On Holding’s valuation metrics, including its current P/E ratio of 120.72 and detailed growth projections, along with 14 additional ProTips that could inform investment decisions.
In other recent news, On Holding AG reported strong financial results, significantly exceeding expectations. The company’s fourth-quarter earnings per share (EPS) reached CHF 0.33, well above the consensus estimate of CHF 0.13, driven by a 36% increase in sales and improved gross margins. Analysts from Citi and Raymond (NSE:RYMD) James highlighted the robust sales growth, with Citi noting a 41% constant currency sales growth and Raymond James emphasizing a gross margin improvement of 168 basis points. UBS maintained a Buy rating but lowered its price target to $65, citing strong brand momentum and anticipated sales growth of at least 26% for 2025. Piper Sandler also maintained its positive outlook with an Overweight rating, expecting a slight beat in fourth-quarter performance due to higher gross margins.
Meanwhile, Truist Securities reaffirmed its Buy rating with a $61 target, attributing recent stock pressure to misinterpretations of sales data. On Holding’s guidance for 2025 projects a 27% sales growth, slightly below some analyst expectations, but the company has a history of surpassing its forecasts. Despite some conservative projections, the consistent performance and strong direct-to-consumer sales channel suggest potential for future growth.
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