On Holding (ONON) short, mcap=$6.7bn, price $21.05 vs $19.13

ONON short pitch:
– Retailer and wholesaler of running shoes.
– One of COVID’s high topline growth and expensive multiple IPOs.
– Recent growth was driven by pandemic-induced trends, fashion shifts, and channel filling.
– Trends have slowed and the wholesale channel now seems to be fully penetrated.
– Investors believe this is the next Lululemon, however, ONON’s different product mix, reliance on one SKU, and propensity to become associated with fashion all pose significant risks.
– The company will enter a period of negative earnings revisions as DTC and wholesale channel growth has slowed over the past several quarters and is entering a period of extreme volatility in the retail industry.

ONON valuation:
– $ONON trades at 23x EBITDA, two turns above $NKE and six turns above $LULU.
– At equally weighted 19xEBITDA and 40xPE valuation, would be $11 stock.

Exp. gain:
43% to $11/share.

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