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 company at outperform with a $38 price target.
“At an early stage On has demonstrated impressive appeal across geographies/channels/categories suggesting a large addressable market (~$300B) and perhaps long-term opportunity to follow closer in the footsteps of New Balance (~$4B+ revenue privately-held brand with ambitions for $7-10B) than to other primarily running brands which have topped out much earlier,” Komp wrote in a note published Monday.
Baird says the brand has “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 grown revenue at a >80% CAGR since inception, we see further opportunity for market share gains, direct-to-consumer expansion, and category extensions to fuel On’s +20-25% algorithm (and higher through 2024E),” the note said.
JPMorgan initiated On at overweight with a $37 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).”
JPMorgan notes that it has taken the supply chain problems in Vietnam into account in its analysis of On. For the six months to June 2021, 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 shares buy with a $36 price target.
“We expect word of mouth, growing awareness, new offerings, and select new distribution help recruit new loyal consumers to the brand to fuel strong growth in 2022+,” wrote analysts led by Jim Duffy.
On began trading on Sept. 15 with an IPO priced at $24 per share. The stock was trading Monday at more than $30.