ONON's Premium Positioning To Drive Stellar Margins: Analyst Bullish On Brand Leverage And Asia-Pacific Investments

Baird analyst Jonathan R. Komp upgraded On Holding AG ONON to Outperform from Neutral and maintained a price target of $33. 

The analyst is bullish on ONON as it provided strategic priorities and three-year and long-term financial targets last week.

The company expects to double its 2023-2026 net sales to at least CHF 3.55 billion by 2026, reflecting a CAGR of over 26%. 

ONON disclosed the long-term targets to achieve an apparel share of 10%+, a retail share of 10%+, and a China share of 10%+ concerning its total net sales. Also, beyond 2026, ONON expects to grow net sales by 20% - 25% annually and exceed the adjusted EBITDA margin of 20%.

The analyst believes strong consumer demand and positive orders for spring 2024 will boost ONON's estimates.

Also, Komp projects recent launches and increasing shares (on U.S. running routes) can boost confidence in ONON's credibility.

Consequently, the analyst raised estimates for FY24 and FY25 adjusted EBITDA by 1% and 6%, respectively, assuming higher margin improvement. 

Also, Komp thinks ONON's premium brand positioning will drive a long-term gross margin of over 60% and adjusted EBITDA margin of over 20%, mainly led by brand leverage distribution and higher Asia-Pacific investments.

Also Read: ON Holdings Has The Potential To Become The Lululemon Of Footwear, Says Analyst

Price Action: ONON shares are trading higher by 2.27% at $25.68 on the last check Monday.

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