2023-07-17 14:13:08 ET
On Holding AG ( NYSE: ONON ) rallied on Monday after Cowen started off coverage on the footwear stock with an Outperform rating. ON's growth, competitive advantages, and return on invested capital profile are said to support a premium valuation.
Analyst John Kernan said the firm's survey work on customer acquisition and the market share opportunity highlights long-tail growth opportunity.
"ON has further opportunity to establish market share in performance and lifestyle, while larger incumbent athletic brands appear to be focused on streetwear, basketball trends. ON grew from $425MM in sales to $1.8B in FY23E and only spent a cumulative $166MMM in Capex to expand. Management now has further scale to invest in additional innovation, customer acquisition/retention and distribution, which we think renders consensus estimates on a multi-year basis too conservative."
Looking to the near term, Kernan expects guidance for FY23 to likely be raised. Cowen's price target of $38 on ONON is 42X the FY24 EPS estimate and 20X the adjusted EV/EBITDA estimate, which is called attractive relative to peers. Cowen assumes ONON can sustain a premium valuation similar to peers such as Lululemon ( LULU ), Nike ( NKE ), Deckers Outdoor ( DECK ), and other European luxury brands.
On Wall Street, ONON now has 10 Buy-equivalent ratings in comparison to 1 Hold-equivalent rating and 2 Sell-equivalent ratings.
Shares of ON Holding ( ONON ) were up 6.65% at 2:15 p.m. and carved out a new all-time high of $35.56 earlier in the session.
More on ON Holding:
- On Holding Needs A Perfect Run To Satisfy Investors
- ON Holding's track record of earnings beats and misses
- Valuation metrics on ON Holding
- Seeking Alpha's Quant Rating for ON Holding
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On Holding hits new high after Cowen says the footwear stock deserves a premium valuation