On Wednesday, JPMorgan adjusted its price target on shares of On Holding AG (NYSE:ONON), a company known for its performance footwear and sportswear, to $34 from the previous target of $35, while reiterating an Overweight rating on the stock. The firm's analysis followed a 9% decline in On Holding's stock price on Tuesday, which the analyst described as excessive.
The rationale behind maintaining the Overweight rating, despite the price target adjustment, is based on several factors. Firstly, the analyst does not foresee any downgrades to consensus estimates, including top-line revenue, due to positive remarks about the company's order book and despite the incremental pressure from foreign exchange translation.
Moreover, the underlying trends for On Holding remain robust, with the brand gaining market share in the footwear segment and gaining more traction in apparel after a rebranding and better product segmentation.
On Holding's product mix has also been highlighted as healthier, with specific mention of the Cloudmonster 2, which is performing well in the run specialty category without significantly affecting sales of its predecessor, the Cloudmonster 1.
Furthermore, the company's guidance suggests at least 30% growth and an adjusted EBITDA margin expansion of 50-100 basis points for the fiscal year 2024, which is viewed positively in comparison to other recent reports in the industry.
The analyst noted that while some investors have become less negative about On Holding in the past few months, the overall market sentiment appears skewed towards expecting the company's top-line guidance to miss consensus expectations due to foreign exchange concerns.
However, with these issues already reflected in the stock's recent performance and no anticipated downgrades to consensus estimates, the analyst believes that the stock's devaluation is overly severe and anticipates a recovery. The firm's stance remains Overweight on On Holding AG shares.
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