ON Holding's (NYSE: ONON) stock price is down 15% following the Q4 results and presents a solid buying opportunity. The move is alarming and may impact the price action in the near term, but technical and fundamental factors suggest higher prices will come over time. 

Among them is the company’s sustained growth and profitability; another is the analysts' overwhelmingly bullish sentiment. They rate the stock as a Moderate Buy and have supported price action for the last year, raising their price targets and leading the market. They may reset their targets now that the guidance is in, but it is unlikely that the sentiment will shift or that a sustained downtrend will begin. 

ON Holdings Growth Slows: Hyper-Growth is Over

ON Holdings' solid quarter is highlighted by sustained double-digit growth, margin improvement, and positive guidance, but a serious problem exists. While up 22% YOY, revenue growth is slowing compared to last year and fell short of the consensus by a solid margin. That is causing the market to reset its expectations but is not enough to alter the company’s trajectory. Growth is still coming, only slower than the market had previously been pricing. 

Margin news is the same. The company sustained another quarter of positive EBITDA margin, but margin pressure is present, and the results are weak compared to consensus. Adjusted EBITDA grew at 16%, 600 basis points slower than revenue, leaving the adjusted earnings at $0.06 or less than half of what the Marketbeat.com consensus forecasted. FX conversion played a part, shaving 900 basis points off the top line, and is expected to weigh on results this year. 

Guidance is also the same. The company forecasts another solid quarter of growth for Q1, in the 20% range, but growth is slowing significantly from last year’s hyper-growth 90% pace. The forecast is also below consensus and includes an expectation for a flat margin. 

Analysts Defend Targets: ON Holdings has 25% Upside Potential

The first analyst activity to hit the wires comes from Telsey Advisory Group, which reiterated an Outperform rating and a $37 price target. The Outperform rating and price target are above the consensus Moderate Buy and $35 target, implying a 25% upside. The takeaway is that sentiment took a hit with the Q4 results and guidance but is holding firm. 

Assuming there are no significant differences in the subsequent revisions, investors can expect ONON shares to rebound sooner rather than later. The market already shows support at the critical level and may roll into a solid buy signal soon. 

Nike and Lululemon Report in Two Weeks

Nike (NYSE: NKE) and Lululemon Athletica (NASDAQ: LULU) report and will provide another catalyst for the specialty apparel/shoe market in two weeks. However, because the market expectations for them are mixed, the impact of the catalyst may differ greatly

The results from ONON suggest weak results from both, but only one market is pricing in the possibility. Nike's shares are down significantly in 2024 due to negative pressure from analysts, while Lululemon's analysts have it on the Most Upgraded list. The twenty-nine revisions to Nike revenue and earnings tracked by Marketbeat are all negative, expect a YOY contraction, and may have overestimated weakness. It is set up to rebound, providing a solid report. 

Lululemon’s estimates for earnings and revenue have only been revised higher, and they expect solid growth. Given a solid report, the stock price may continue to increase, but there is a risk. This market trades below a critical resistance level and at a high valuation that may cap gains until later in the year if the results are not better than expected. The analysts' sentiment is firm, but upward price target revisions are unlikely without better-than-expected results, and the consensus aligns with critical resistance.