Investing.com — Analysts at HSBC have started reporting on When holding (NYSE:) with a ‘hold’ rating, with a target price of $52, one of the highest on the market.
While the Swiss performance sportswear company is seeing global sales growth, HSBC analysts have indicated that the risk-reward ratio for the company is currently unconvincing.
On Holding has achieved remarkable global growth, especially within the sports footwear market, thanks to its distinctive brand positioning and product innovation.
The company has increased its presence in the market through several product launches and the opening of new stores.
This growth has positioned the company as a player in the global sporting goods industry, although its market share in China remains relatively smaller compared to local competitors.
HSBC’s decision to cover On Holding is in line with a broader view of the sporting goods sector.
The sector, after facing challenges such as excess inventories, cost pressures and exuberance following the COVID-19 crisis, has stabilized thanks to improved inventory management and favorable exchange rate conditions.
The revival of sporting events such as the UEFA European Football Championship and the upcoming Paris Olympics have also contributed to positive momentum in the sector.
HSBC analysts highlighted that the sporting goods market has varied dynamics, and not all companies are equally positioned to benefit from recent improvements in the macroeconomic environment.
“We favor adidas, lululemon (NASDAQ:) and Amer Sports (all Buy), while we have Hold ratings on Puma and Nike (NYSE:),” the analysts said.
The analysts noted that while On Holding is still seeing strong revenue growth, many of the positive developments are already priced into the stock, reducing its short-term upside potential.
In the first half of 2024, the company managed to gain global market share, positively contributing to industry growth.
Despite On Holding’s recent growth, HSBC expects sales momentum to face challenges in the near term due to broader industry factors.
HSBC’s forecast for On Holding shows optimism about its long-term growth prospects. The analysts forecast On Holding’s revenue to grow from CHF 2.3 billion in 2024 to CHF 3.8 billion in 2026, representing a robust growth trajectory.
However, the company’s high valuation multiples – especially its price-to-earnings (PE) ratio of 44x for 2024 and 39.6x for 2025 – suggest that much of the expected growth is already reflected in the share price.
Moreover, the company’s profit margins are expected to steadily improve in the coming years.
HSBC analysts had a more constructive view on the sporting goods sector in 2024 compared to six months earlier, due to favorable inventory levels, the impact of major sporting events and positive currency movements.
Despite these overall improvements, HSBC emphasizes that not all companies can benefit equally in the short term.
While On Holding reports strong sales growth, it faces stiff competition from both global brands such as Adidas (OTC:) and Nike, as well as local Chinese brands such as Anta and Li Ning in the crucial Chinese market.
Within the broader competitive landscape, On Holding has carved out a niche, especially in premium sports footwear.
