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On Holding Regains Momentum After Dip in Share Price

Key Points

  • After gapping down, On Holding stock stabilized around $27.21, rebounding to trend along its 10-day moving average.
  • With its running shoes known for creative designs and eco-friendly materials, On has been snagging market share from larger footwear makers like Nike.
  • Wall Street predicts 54% earnings growth this year and 48% next year.
  • 5 stocks we like better than ON

Athletic footwear maker On Holding AG NYSE: ONON gapped down hard on August 15 after reporting earnings, but like any good shoe, found support that provided stability for investors.

A look at the On Holding chart shows the stock sprinting downhill but finding a floor at its August 23 low of $27.21. In the past three weeks, the stock trended higher along its 10-day moving average.

On Holdings is a newcomer to a long-established market dominated by big players like Nike Inc. NYSE: NKE. In addition to shoes, the company also sells athletic apparel and accessories, although footwear accounts for about 95% of its business.

In regulatory filings, On Holding says competitors across different categories include Nike, Adidas AG OTCMKTS: ADDYY, Reebok, Under Armour, Inc. NYSE: UAA, Brooks Sports, Deckers Outdoor Corp. NYSE: DECK, Asics, New Balance, Lululemon Athletica Inc. NASDAQ: LULU, and Patagonia.

Taking Market Share from Bigger Brands

On Holding’s On running shoes, which include the Cloudmonster, Cloudrunner and Cloudgo models, have snagged a growing market share from many of the big athletic shoe brands. The company specializes in eye-catching designs and emphasizes sustainability through its use of materials and high-performance specifications.

That combination of factors has caught the attention of celebrity investors, including Roger Federer and Gisele Bundchen, and big-money institutions have been piling in. Financehubusa’s On Holding institutional ownership data show 193 big buyers accounting for $1.21 billion in inflows in the past 12 months versus 77 sellers accounting for $654.34 million in outflows.

So what happened to cause the downdraft in August?

To answer that, let’s look at the most recent quarterly revenue and earnings. The company earned 4 cents a share on revenue of $496.2 million. That was a decrease of 70% on the bottom line and an increase of 62% on the top line.

As you can see on Financehubusa’s On Holdings earnings page, net income missed views, but revenue came in well ahead of expectations.

However, analysts and investors were concerned about inventories, which rose in the first six months of the year. They also expressed worries about On’s sales, general and administrative expenses, including marketing, which also increased.

Investors Not Swayed by Higher Sales Forecast

The company raised full-year sales guidance, but investors weren’t particularly impressed, sending shares 14% lower in enormous trading volume. But the decline seems to offer a buying opportunity for On Holding stock.

Frequently, after a stock posts a strong rally, investors use any excuse to pocket some profits. It’s possible some of that was happening with On Holding, whose share price had more than doubled from its October low of $15.44 before the selloff.

It’s still up 96% from that point, meaning investors who have held for the past several months are still in the black.

Stock Price Outrunning Other Footwear Makers

Within its sub-industry of apparel and shoes, On’s price performance is outpacing peers, including Deckers, Adidas, Skechers U.S.A. Inc. NYSE: SKX, and Crocs Inc. NASDAQ: CROX.

When it comes to earnings growth, the company has performed well since going public, but a pre-IPO loss of 2 cents a share in 2020 means it doesn’t yet have a three-year earnings growth rate. Revenue, though, grew by 70% during that time.

Before you consider ON, you’ll want to hear this.

Financehubusa keeps track of Wall Street’s top-rated and best-performing research analysts and the stocks they recommend to their clients on a daily basis. Financehubusa has identified the that top analysts are quietly whispering to their clients to buy now before the broader market catches on… and ON wasn’t on the list.

While ON currently has a “Moderate Buy” rating among analysts, top-rated analysts believe these five stocks are better buys.

View The Five Stocks Here

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