As Nike (NKE) Craters to New Lows, Insiders Are Buying This Rival On The Dip

Nike's (NKE) stock recently hit new lows in approximately twelve years due to increased competition and declining sales. Notably, the stock's forward P/E ratio remains at 23.38, which is 46% higher than the sector median of 15.99. Another smaller competitor, On Holdings (ONON), has caught the attention of insiders, who are increasing their holdings.

In August 14, the company's CEO Caspar Coppetti and co-founder Olivier Bernhard bought 65,000 shares each, following the company's Q2 revenue miss and guidance cut. Despite this, On Holdings' Q2 revenue grew by 22% at constant currency, a slowdown of around 480 basis points from the previous quarter. While wholesale grew by only 12.7%, management noted that the slowdown was deliberate, targeting the Americas market to avoid discounts and maintain volume.

On Holdings' profitability improved, with gross margin rising to 65.4%, up 390 basis points year-over-year, and adjusted EBITDA margin expanding 160 basis points to 19.8%. The company's EMEA and Asia-Pacific regions grew by 20.5% and 54.7% respectively. Bulls argue that the wholesale slowdown was a strategic choice and shouldn't be overemphasized.

ONON reported that they would avoid building up retail inventory, which could potentially hurt their full-price positioning. The company plans to launch a new shoe in the fall, aiming to keep shelves clean for successful product launches. ONON's forward earnings multiple has dropped by approximately 70% compared to its five-year average, and its PEG ratio is below the sector median.

Management highlighted that expected tariff refunds later this year haven't been incorporated into current numbers, suggesting their outlook may be conservative. Bulls are eagerly awaiting ONON's September Investor Day, the company's first in three years, to gain insight into their long-term growth strategy. While acknowledging the risks, the author believes that other AI stocks present greater promise for higher returns and a faster turnaround.

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