Jim Cramer says wait to buy On Holding on a pullback, cites supply chain and valuation worries


CNBC’s Jim Cramer said Tuesday investors should wait to buy shares of On Holding, while stressing he’s a fan of the newly public footwear and athletic apparel maker.

Right now, the “Mad Money” host said he thinks there’s too much risk because the company is grappling with coronavirus-related challenges in Vietnam, where its shoes are made. Add in the fact the stock is “pretty expensive,” trading at over 10 times this year’s sales, and Cramer said patience is prudent.

“I think On Holding could be in for a turbulent next few months, but you should get ready to buy it gradually on the way down because, other than the Vietnam supply chain issue, this one’s got a lot going for it,” Cramer said.

“If you buy it now, you’re betting that everyone knows abut the problem, but that’s rarely the case, which is why waiting for lower prices might not be a bad idea,” he added.

On Holding debuted on the New York Stock Exchange on Sept. 15. After pricing its IPO at $24 per share, the stock opened at $34.50 and briefly touched the $40s in its first few sessions. It closed Tuesday at $29.77, down about 1%.

In general, Cramer said the Switzerland-based company’s financials are “excellent,” pointing to sales that grew at a 66% compound annual rate from 2018 to 2020 and a “nearly pristine balance sheet.”

“On top of that, it’s profitable, not just on an EBITDA basis, but on a straight-up earnings per share basis,” Cramer said, which is “highly unusual with the junk that’s coming public these days.”

Cramer’s hesitance to recommend the stock Tuesday is largely about Vietnam and what the Covid situation there could mean for On Holding.

“Remember, Nike’s got a Vietnam problem, too, and they told us that the Covid-related shutdowns are hurting their numbers,” Cramer said. “Given that On Holding makes 100% of its shoes in Vietnam, the next couple quarters could be pretty ugly. We don’t know how bad it will be, but some analysts are forecasting negative growth rates early next year, which would represent a huge hit.”