On Tuesday, Goldman Sachs reiterated its Buy rating and $36.00 stock price target for On Holding AG (NYSE:ONON), following the company's first-quarter earnings report. The sportswear manufacturer reported adjusted EBITDA of CHF 77.4 million, surpassing the consensus estimate of CHF 73.5 million.
This beat was attributed to robust net sales of CHF 508 million, marking a year-over-year increase of 20.9% and a currency-adjusted growth of 29.2%.
On Holding's performance was bolstered by an impressive group gross margin of 59.7%, which is an increase of 140 basis points from the previous year, exceeding the consensus projection of an 80 basis point increase to 59.1%. The adjusted EBITDA margin reached 15.2%, higher than the anticipated 14.8%. The company also experienced a 13.5% year-over-year rise in net working capital at the end of the first quarter of 2024.
The company's sales growth varied by region, with EMEA currency-adjusted sales rising by 10.4%, the Americas surging by 30.4%, and APAC skyrocketing by 90.7%, each outperforming their respective consensus estimates. Direct-to-consumer (DTC) sales soared by 39%, while wholesale channel sales increased by 12.2%, both exceeding consensus figures.
For the full year 2024, On Holding AG has reiterated its guidance, projecting currency-adjusted sales growth of at least 30%, which aligns with the consensus of 29.7% and Goldman Sachs' own estimate of 29.2%. The company anticipates net sales to reach at least CHF 2.29 billion, using current spot rates, a slight increase from the previous forecast of CHF 2.25 billion and above the consensus of CHF 2.27 billion.
The gross margin is expected to be at least 60%, and the adjusted EBITDA margin is forecasted to be between 16%-16.5%. Following these results, Goldman Sachs anticipates that the consensus estimate for the full year 2024 adjusted EBITDA will remain around CHF 369 million.
InvestingPro Insights
InvestingPro data reflects a promising trajectory for On Holding AG, with a significant revenue growth of 46.64% over the last twelve months as of Q1 2023. This aligns with the company's robust sales performance highlighted in the recent earnings report. The gross profit margin stands at an impressive 59.56%, reinforcing Goldman Sachs' positive outlook on the company's profitability and operational efficiency.
Despite recent volatility, with the stock price experiencing a 9.76% decline over the past week, On Holding AG's fundamental metrics suggest resilience. The company's strong gross profit margins and anticipated sales growth, as noted in InvestingPro Tips, provide a solid foundation for future performance. Investors should note that the company is trading at a high P/E ratio of 125.64, which suggests a premium valuation that could be justified by its growth prospects.
For those seeking more in-depth analysis, there are 14 additional InvestingPro Tips available for On Holding AG, which can be explored to gain a comprehensive understanding of the company's financial health and market position. To access these insights and enhance your investment strategy, consider using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro.
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