Right now, the host of “Mad Money” said he believes there are too many risks as the company grapples with coronavirus challenges in Vietnam, where its shoes are made. Add to that the fact that the stock is “quite expensive,” trading at more than 10 times this year’s sales, and Cramer said patience is cautious.
“I think On Holding might experience some turbulence in the next few months, but you should be prepared to buy it gradually because apart from the supply chain problem in Vietnam, this one has a lot to do,” Cramer said. .
“If you buy it now you bet everyone knows the problem, but it rarely is, which is why waiting for lower prices might not be a bad idea,” he said. -he adds.
On Holding debuted on the New York Stock Exchange on September 15. After valuing its IPO at $ 24 per share, the stock opened at $ 34.50 and briefly touched $ 40 in its first few sessions. It closed Tuesday at $ 29.77, down about 1%.
In general, Cramer said the financial results for the Switzerland-based company are “excellent,” highlighting sales that grew at a compound annual rate of 66% from 2018 to 2020 and a “near-perfect balance sheet.”
“On top of that, it’s profitable, not just on an EBITDA basis, but on a direct earnings per share basis,” Cramer said, which is “very unusual with the trash that’s going public these days. -this “.
Cramer’s reluctance to recommend action on Tuesday is largely about Vietnam and what the Covid situation could mean for On Holding.
“Remember Nike has a problem in Vietnam as well, and they told us the Covid-related closures were hurting their numbers,” Cramer said. “Since On Holding manufactures 100% of its shoes in Vietnam, the next few quarters could be pretty ugly. We don’t know how bad that will be, but some analysts are predicting negative growth rates early next year which would be a huge success. “