On Holding is the IBD Stock of The Day for Monday. Shares of the Swiss shoemaker behind the On Running brand are nearing an entry amid a pullback. Meanwhile, footwear stocks were mixed Monday following the latest retail sales data.
March retail sales rose 0.7% overall, beating forecasts of a 0.3% increase. Excluding auto and gas, sales rose 1%, also ahead of estimates. Meanwhile, February's overall gain was revised up to 0.9% from the prior gain of 0.6%.
The rising sales are a positive sign for retailers like On Holding, which has seen revenue growth slow over the last four quarters. On Holding on March 12 tumbled after posting a major earnings miss. The Swiss company reported a Q4 loss of 6 cents per share, compared with FactSet forecasts of 500% growth to 12 cents per share.
On Running said it expects to achieve a 2024 net sales growth rate of 30% to 2.25 billion Swiss francs ($2.57 billion), driven by strong demand for the brand and its product pipeline. For the first quarter, On Running expects direct-to-consumer (online) net sales to grow 26% to 495 million Swiss francs ($564.8 million).
FactSet revised down its Q1 forecast, now expecting a nearly 6% earnings decline to 16 cents per share on more than 16% revenue growth to $546 million. Analysts previously guided an earnings increase to 18 cents per share on 28.1% revenue growth to $601 million.
FactSet sees full-year earnings increasing 90% to 76 cents per share on 22.44% revenue growth to $2.499 billion. Wall Street prior to On Running's report expected 95% earnings growth on a 29.2% sales jump.
Elsewhere, Barclays on April 1 initiated coverage of On Holding stock with an overweight rating and $38 price target, according to a research note reported by The Fly. On Running has the fastest growth in U.S. footwear. And relatively low brand awareness suggests strong potential for future growth, Barclays wrote.
Meanwhile, expanding into the apparel category and developing its wholesale channel offer further growth opportunities, as well as On Holding's owned direct-to-consumer channels. Barclays believes continued execution for the company's growth story should drive ONON stock higher.
ONON Stock
On Running ranks fourth in the Apparel-Shoes & Related Manufacturing group, according to IBD Stock Checkup. Hoka maker Deckers leads the group.
ONON stock is working on a rebound off its 50-day moving average after pulling back to test that level on April 5. Investors could use a jump above On Running's 21-day exponential moving average at 33.15 as an entry opportunity. But Monday's weak-volume jump above the 21-day level, followed by a 2% pullback to below the 50 day, shows why an increase in volume helps validate a move past a buy point.
On Running shares could form a base in a couple weeks, which is shaping up to have a potential buy point at 36.15.
On Holding has an 84 Composite Rating out of a best-possible 99. The Composite Rating combines various technical indicators into one easy-to-read score. The stock's relative strength line has fallen from its recent mid-March highs; ONON stock has an 80 RS Rating. However, On Running has a lowly 29 EPS Rating.
Despite the recent pullback, ONON stock rallied more than 21% in 2024.
Dow Jones sports apparel giant Nike rose 1.6% Monday following the retail sales data.
Skechers climbed 1.7% to close in on its 10-day line.
Deckers Outdoor shares advanced 1.5% during Monday trade.
Clog maker Crocs ticked down a fraction toward its 50-day line.
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