On Wednesday, Evercore ISI adjusted its financial outlook for On Holding AG (NYSE:ONON), reducing the price target to $37.00 from the previous $40.00, while maintaining an Outperform rating on the company's stock. The modification follows On Holding's fourth-quarter revenue falling short of Wall Street's expectations—a disappointment highlighted by the firm after a series of stronger-than-expected performances earlier in the fiscal year.
The analyst noted that despite reassurances from On Holding in January regarding controlled promotional activities in the fourth quarter, the company's revenue did not meet the already lowered Street estimates. This was a significant shift from the previous three quarters, where On Holding had surpassed consensus estimates by considerable margins of 10%, 7%, and 6%, respectively, in the first, second, and third quarters.
On Holding's strategy to avoid promotions during a discount-heavy holiday season was recognized, yet it has led to a cautious stance from investors. The company's transparency regarding the challenges it faces was acknowledged, but the guidance for first-quarter revenue, which is below consensus, has done little to alleviate concerns about a potential slowdown in revenue growth.
The analyst's comments reflect concerns about the pace of revenue growth, especially considering the current valuation of On Holding's stock, which trades at 24 times the consensus 2024 EBITDA estimates. The company's recent performance and future guidance have been thoroughly examined in light of the competitive and promotional environment it operates within.
The market will continue to monitor On Holding's performance as it navigates through the evolving consumer landscape and strives to meet its financial targets in the face of these challenges. The revised price target suggests that Evercore ISI still sees potential in On Holding's stock, despite the recent quarter's revenue miss and cautious near-term outlook.
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