On Monday, Barclays initiated coverage on On Holding AG (NYSE:ONON) stock, a company specializing in footwear, with a positive outlook. The firm set an Overweight rating along with a price target of $38.00.
The analyst cited several factors for the favorable rating, including On Holding's status as the fastest-growing brand in the U.S. footwear segment and its relatively low brand awareness, which is expected to drive future growth.
The analyst noted that On Holding's growth is also supported by direct-to-consumer (DTC) initiatives that enhance brand awareness, an increase in wholesale doors, and an expansion into the apparel category. Additionally, improvements in inventory metrics and a cleaner wholesale channel inventory are anticipated to contribute to healthy profitable growth and encourage reordering.
Despite On Holding trading at a significant premium compared to its footwear industry peers, Barclays believes that the company's continued performance and growth trajectory will propel the stock higher. The analyst emphasized that On Holding is positioned in the "sweet spot of consumer adoption" and is expected to expand brand awareness through various strategies including direct store expansion, wholesale door expansion, and moving into the apparel sector.
The analysis conducted by Barclays also revealed that On Holding currently has the lowest brand awareness among its competitors, yet shows one of the highest potential growth rates based on consumer intent to purchase. This potential for increased brand recognition and sales growth underpins the Overweight rating and $38 price target set by Barclays for On Holding AG.
InvestingPro Insights
As On Holding AG (NYSE:ONON) continues to make strides in the U.S. footwear market, recent data from InvestingPro underscores the company's robust financial health and growth prospects. With a market capitalization of $11.28 billion and a significant revenue growth of 46.64% over the last twelve months as of Q1 2023, On Holding demonstrates a strong capacity to scale. The company's gross profit margin impressively stands at 59.56%, reflecting efficient operations and a solid competitive edge in its sector.
InvestingPro Tips highlight two key insights: analysts are optimistic about On Holding's future, expecting net income and sales to grow this year. This aligns with the positive outlook from Barclays, emphasizing the company's rapid growth and potential for increased brand awareness. However, investors should note that the stock is trading at a high earnings multiple, with a P/E ratio of 125.64, indicating a premium valuation that reflects high expectations for future earnings growth.
For readers interested in a deeper dive into On Holding's financials and strategic positioning, there are 16 additional InvestingPro Tips available, offering a comprehensive analysis of the company's performance and outlook. To access these insights and benefit from an expert financial toolkit, use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro.
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