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

CNBC's Jim Cramer mentioned Tuesday traders ought to wait to buy shares of On Holding, whereas stressing he's a fan of the newly public footwear and athletic attire maker.

Right now, the "Mad Money" host mentioned he thinks there's an excessive amount of threat as a result of the corporate is grappling with coronavirus-related challenges in Vietnam, the place its sneakers are made. Add within the truth the inventory is "pretty expensive," buying and selling at over 10 instances this 12 months's gross sales, and Cramer mentioned endurance 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 mentioned.

"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 inventory opened at $34.50 and briefly touched the $40s in its first few periods. It closed Tuesday at $29.77, down about 1%.

In basic, Cramer mentioned the Switzerland-based firm's financials are "excellent," pointing to gross sales that grew at a 66% compound annual fee 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 mentioned, which is "highly unusual with the junk that's coming public these days."

Cramer's hesitance to advocate the inventory Tuesday is essentially about Vietnam and what the Covid scenario there might imply 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 mentioned. "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."

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