ON Holdings Has The Potential To Become The Lululemon Of Footwear, Says analyst

Wedbush analyst Tom Nikic reiterated an Outperform rating on the shares of On Holding AG ONON with a price target of $36.

In its analyst day, On Holding laid out a plan to double revenues by FY26 (26% CAGR) and take margins up by 300+ basis points.

The analyst said the brand still has less than 10% brand awareness in the U.S., and even in Germany, they only have 15% awareness.

Even in their home country of Switzerland, their awareness is below 50%. So, they can continue to drive growth globally as the visibility of the brand increases, noted the analyst.

Related: Swiss-Based Sportswear Brand On Holding Chalks Out Long Term Outlook - What's On The Cards?

When ONON went public two years ago, they only had eight stores globally, which will grow to more than 30 stores by the end of 2023, noted the analyst.

The company sees numerous benefits from opening their own stores, including an uplift in local e-commerce traffic, increased visibility of their apparel offering, and more effective growth in markets that don't have a high density of premium wholesale partners, said the analyst.

By adding innovation, which has been the company’s point of differentiation, On believes that it can continue taking prices higher, continuing to position the brand as a premium player in the space.

The company continues to view ONON as one of the most compelling growth stories in our sector, and has a long runway to grow brand awareness, expand distribution, and branch out into new categories.

Over the long run, the analyst could see this becoming "the Lululemon of footwear" given their premium positioning and focus on innovation.

Price Action: ONON shares are trading lower by 3.07% at $24.28 on the last check Thursday.

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