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On Tuesday, Goldman Sachs updated its outlook on On Holding AG (NYSE:ONON), raising the price target to $50 from $47 while keeping a Buy rating on the stock. The decision follows On Holding's second-quarter 2024 financial results, which displayed a robust performance, with adjusted EBITDA reaching CHF 90.8 million.
This was primarily fueled by a net sales increase of 27.8% year-over-year to CHF 567.7 million, with currency-adjusted sales growth of 29.4%.
The company's group gross margin improved slightly to 59.9%, a 40 basis points increase from the previous year, and adjusted EBITDA margins hit 16%.
Notably, net working capital decreased by 5.3% compared to the same period last year, although it rose by 14.3% from the fourth quarter of 2023. Sales growth was observed across all regions, with EMEA up by 22.2%, Americas by 25.8%, and APAC by an impressive 84.7%. The direct-to-consumer channel grew by 28.1%, while wholesale expanded by 27.6%.
On Holding has reaffirmed its full-year 2024 guidance, anticipating currency-adjusted sales growth of at least 30% and net sales of at least CHF 2.26 billion based on current exchange rates, a slight adjustment from the previous CHF 2.29 billion target. The company also expects to maintain a gross margin of around 60% and an adjusted EBITDA margin between 16% and 16.5%.
In light of the recent earnings report, Goldman Sachs has adjusted its forecasts for On Holding. The firm now projects currency-adjusted sales growth of 30% for 2024 and 26.1% for 2025, with gross margins holding steady at 60.2% and 60.7%, respectively.
Adjusted EBITDA margins are expected to be 16.5% for 2024 and 17.5% for 2025, with EBITDA projections revised to CHF 373 million for 2024 and CHF 496 million for 2025. The firm also modified its expectations for depreciation charges, capital expenditures, and share-based compensation for the upcoming years.
Lastly, due to unrealized foreign exchange losses, Goldman Sachs has reduced its estimate for On Holding's net finance income for 2024 by approximately CHF 30 million, leading to an adjusted diluted earnings per share forecast of CHF 0.58, down from CHF 0.67. The updated price target of $50 reflects these revised expectations and the company's solid financial performance.
In other recent news, On Holding AG reported impressive Q2 growth and the introduction of innovative technology. The company announced a significant 28% increase in net sales, reaching CHF567.7 million, and a substantial rise in net income, soaring to CHF30.8 million from CHF3.3 million in the same quarter the previous year.
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