Here’s an update on the chart in a breakout shoemaker that is giving Nike a run for its money. In May, I wrote about On Holding AG (ONON) ahead of its earnings with a buy recommendation. The earnings report beat expectations and the stock rallied more than 40%. Now the shares are pulling back into support as we look ahead to not only next quarter’s earnings, but the start of the summer Olympics where the leading shoe brands will be prominently featured. I recently added to my ONON holdings, and also hold another footwear name in our growth portfolios, Deckers Outdoor (DECK) , and believe both companies will continue to take market share from Nike (NKE) in coming quarters. To start, let’s examine the ONON weekly chart. You’ll notice that the stock popped on the week of May 14th following the earnings report above the 2023 highs of $36.90. In the world of technicals, this level is now a pivot point that was formerly resistance, and can now be expected to act as support. Notice the accompanying volume spike on the earnings that only reinforces this observation. Included in the secondary panel below is a ratio chart of Nike divided by ONON. You can clearly see ONON/NKE has been moving higher since 2023 indicating ONON’s outperformance to the shoe giant. To get even more context of how NKE is doing relative to the other companies in the footwear sub-industry group let’s look at a trailing 12-month performance chart of 7 stocks in the group. Nike is -12.64% in the prior 12 months compared to ONON at +18.24% and DECK at +85.80%. The underperformance I believe is attributable to two factors, one is valuation and the second is lack of innovation. Looking at the valuation, NKE is trading about 26 times 2024 expected earnings and 25 times 2025 expected earnings. Contrast that with ONON trading at a 45 and 39 forward PE, and DECK with a 33 and 31 forward PE. ONON and DECK are certainly more richly valued, but if you look at the revenue growth in the past two years, and looking ahead one year based on analysts expectations, you’ll see Nike’s revenue growth has been flat-to-down and only expected to start growing again in 2025. DECK is ranging from 10% to 20% revenue growth from the same period last year and ONON is running from 20% to 33% revenue growth. These two companies are growing quickly in the running space, whereas the consumer belief that Nike is falling behind in the competitive running space and relying too heavily on their Jordan line of shoes. ONON has the backing of tennis superstar Roger Federer and at the end of 2023 launched their line of tennis shoes, where they will likely gain ground on Nike in this market segment as well. While the stock is above the 2023 breakout level of $36 we will continue to stay constructive and look for the stock to move back to all-time highs of $55.87. -Todd Gordon, founder of Inside Edge Capital, LLC DISCLOSURES: (Gordon owns ONON personally and in his wealth management company Inside Edge Capital.) All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
