Swiss shoemaker On Holding is the IBD Stock Of The Day for Wednesday. On running shoes revolve around the innovative Cloud product line. Its shares are trading near a buy point and testing support along a key moving average.
The company behind On running shoes has rallied to three-year highs in 2024 as its innovative shoe lines and strategic marketing have put the company in competition with the biggest names in sports gear, like Nike and Adidas.
"First and foremost, they are very innovative from a product perspective. On shoes are nothing that the consumer has seen before," Wedbush securities analyst Tom Nikic recently told IBD. "They're nothing that the consumer has felt before on their foot, and so it's something that is new and exciting. That's been the primary driver of success." Nikic added that On Holding's rise "comes at a time when many of the legacy brands out there, most notably Nike, have been lacking in product innovation."
The shoemaker on Aug. 13 posted adjusted earnings of 16 cents per share, short of FactSet views for 19 cents. Revenue leapt 29% to a record $653.8 million, ending a string of five quarters of decelerating sales growth. Analysts expected $646.8 million in sales.
On Holding maintained its full-year forecast for at least 30% net sales growth on a constant currency basis. That implies net sales of at least 2.26 billion Swiss Francs, about $2.65 billion. The revenue outlook was just shy of FactSet estimates for $2.66 billion.
On Running Innovation
Nikic told IBD that On's current growth trajectory could have plenty of room to run before stalling out, similar to Under Armour or Lululemon.
After the earnings report, Wedbush lifted its price target on On Holding to 48 from 42 and maintained a buy rating on the shares. Nikic noted it was the first time that On Holding did not raise its guidance since going public in 2021. Still, the firm is bullish about On's "industry -leading" revenue growth, expectations to resume acceleration in the second half of 2024, strong full-price sales trends and lean inventories.
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A number of firms also raised their price targets for ONON shares slightly following results. Baird pointed to On's "innovation-led culture" while Morgan Stanley says the company continues to display underlying business momentum with evidence of best-in-class brand management.
For the year, analysts see earnings surging 152% to $1.01 a share in 2024, according to FactSet. Looking ahead, Wall Street predicts earnings of $2.63 per share by 2028, a 557% jump from 2023 levels.
On Holding leads the Apparel-Shoes & Rel Mfg Group according to the IBD Stock Checkup, which includes Hoka maker Deckers Outdoor, Steven Madden, Skechers, and sports giant Nike. The company also ranks on the IBD 50 list.
ONON Stock Near A Buy Point
ONON stock is trading near a 44.30 buy point and testing support at its 21-day exponential moving average.
Arguably, the real buy point was 43.20 for a messy handle, which shares cleared on Aug. 21. ON running shares peaked at 48.08 on Aug. 27, which marked its highest price since late November 2021.
On Holding is still trading just below that buy zone.
The 21-day line appears key lately as shares have held above the moving average since Aug. 8. On Holding is still well above its 50-day moving average.
ONON stock has rallied more than 63% in 2024 through Tuesday's close.
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