On Holding AG is following a path carved out by New Balance, according to Baird analyst Jonathan R. Komp, which initiated the newly public athletic-gear company at outperform with a $38 price target.
“At an early stage On has demonstrated impressive appeal across geographies/channels/categories,” according to the Baird analyst, suggesting an “addressable market” of some $300 billion and “perhaps long-term opportunity to follow closer in the footsteps of New Balance,” a private brand with some $4 billion and an ambition to reach $7 billion to $10 billion than in the footsteps of primarily running brands, “which have topped out much earlier.”
In the Baird note, published Monday, Komp wrote that On enjoys “broad appeal” and is “uniquely positioned” thanks to the company’s origins. On
was founded by Olivier Bernhard, an endurance athlete, and the company’s innovations are focused on performance.
After having profitably seen revenue rise at a compound annual growth rate of greater than 0% since its inception, On has, in the Baird view, “further opportunity for market-share gains, direct-to-consumer expansion and category extensions.”
JPMorgan initiated On at an overweight rating with a $37 share-price target.
“On operates in an attractive industry with substantial barriers to entry and high growth prospects underpinned by health and casualisation tailwinds,” analysts wrote.
“Importantly, we believe On is striking a balance between its performance roots (crucial for credibility in the sportswear space) and lifestyle (paramount for growth).”
The JPMorgan team observed in the research note that supply-chain problems in Vietnam have been taken into account in their analysis of On. For the six months ending in June, all of On’s shoes were made in that country.
“While the situation remains fluid, we expect any impact to be transitory and solely driven by supply,” JPMorgan said.
“Underlying demand for the brand instead remains strong, and hence we would look to be opportunistic on any near-term supply-chain-driven weakness. Longer term, we note On’s premium-price positioning and strong pricing power as on offset to broader inflationary pressures.”
Stifel rates On Holding a buy with a $36 share-price target.
“We expect word of mouth, growing awareness, new offerings, and select new distribution [to] help recruit new loyal consumers to the brand to fuel strong growth in 2022 [and afterward],” wrote analysts led by Jim Duffy.
On began trading on the New York Stock Exchange on Sept. 15, on the heels of an IPO priced at $24 per share. The stock closed Monday at more than $30.