on hold (Onon), the parent company behind Swiss shoemaker On Run, fell below buy point and other key levels after second-quarter earnings failed and guidance indicated continued sluggish sales growth. ONON stock doubled in 2023 prior to the report.
On current earnings
Backed by tennis champion Roger Federer, the Switzerland-based performance shoe maker is a rising star in the industry. Sales increased 55% to over $1 billion in 2022, powered by the reinvention of popular brands Cloudmonster, Cloudrunner and Cloudgo performance trainers.
Sequentially, adjusted earnings fell 66% to 5 cents per share, compared to 15 cents per share a year ago. Revenue jumped 64.5% to $505 million, at a jittery pace, but slowed for the second consecutive quarter.
Analysts had expected running earnings of 13 cents per share, increasing revenue by 55.7% to $477.5 million.
Over the year, On Run drove net sales growth of 44% to CHF 1.76 billion. This translates to an increase to about $2 billion, compared to $1.32 billion in 2022. But that meant revenue growth of 30% in the second half, which indicates a continued slowdown.
The company maintained its gross margin forecast at 58.5% and its adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) at 15%.
Sprint shoe stock
Shoe stock raced through early 2023, but then the group turned mixed. Crocs (CROXThe stock peaked in late April, then moved down and is now lower for the year. Skechers (SKXThe stock has stabilized and has made grudging gains since the beginning of May. It has an annual gain of 26%.
Disappointment maker outdoor deckers (deck) It was an impressive set, and it continued to climb to all-time highs after ratings were dumped. Deckers shares are up nearly 40%.
But On Holdings was the clear leader of the group. UBS raised its price target for ONON stock to 46 from 42 last Tuesday and maintained the buy rating on the stock. That suggests the stock has another 32% room to go. UBS sees a good opportunity for On to raise its 2023 guidance, which should boost sell-side estimates and market sentiment.
KeyBanc commenced coverage of On Holding on July 25 with an overweight rating and a price target of 42 on the stock. Analyst Ashley Owens wrote in a research note: On Running is a premium sportswear brand made by runners and runners, and awareness of it continues to grow thanks to its grassroots marketing campaigns and unique product line. KeyBanc believes On guidance for 2023 is conservative and that there is upside potential as margins expand.
ONON stock fell 13.1% to 30.09 on the day, falling decisively below 33.67 cups with a buy point handle, triggering an 8% sell base. The stocks also fell below the 50-day moving average.
Inventory has doubled in a row this year before the report, but that included a big sell-off of first-quarter earnings. That reflects concerns about excess inventory after On Running’s first-quarter earnings report — which turned into a teapot with a handle.
ONON cleared that rule in July, but had trouble getting past the 5% buy zone. The losses on Tuesday pushed the stock below the overbought zone to enter at 33.67 and On Running joined the rally IBD Leaderboard Existing having crossed the trend line near 30 on June 9th. The RSI line is moving up, and the stock is still in the overbought area from the entry point 33.67. But he was demoted to half a spot on the Leaderboard.
In the running apparel, footwear and related manufacturing group leads in accordance with IBD stock check.
ONON shares have a composite rating of 99, which combines various technical indicators into one easy-to-read score. On the run he has a rating of 81 EPS. The stock’s line of relative strength is off the highs since mid-May and it currently holds a rating of 95 RS.
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