On Holding stock rating cut to Outperform from Strong Buy at Raymond James

Investing.com - Raymond (NSE:RYMD) James downgraded On Holding AG (NYSE:ONON) to Outperform from Strong Buy while maintaining its $66.00 price target. According to InvestingPro data, the company maintains impressive gross profit margins of 60.6% and has demonstrated strong revenue growth of 34.9% over the last twelve months.

The downgrade reflects lowered estimates due to foreign exchange impacts from the strengthening Swiss Franc and updated tariff assumptions, as approximately 90% of On Holding’s footwear is sourced from Vietnam.

Raymond James expects second-quarter results to be "less clean" due to FX headwinds, tariffs, and slower wholesale growth related to product launch timing, though channel checks indicate a modest acceleration in Google (NASDAQ:GOOGL) searches and robust web traffic quarter-over-quarter, suggesting strong direct-to-consumer performance.

The firm noted that On Holding reported April was its strongest month in company history, with 2025 expected to benefit from new innovation (concentrated in first and third quarters), increasing wholesale distribution, and growing brand awareness globally, particularly in China.

Despite lowering gross margin percentage estimates due to higher tariff rate assumptions for Vietnam, Raymond James believes On Holding is better positioned than most competitors to mitigate these impacts given its pricing power as a premium brand, with additional operational leverage expected from warehouse automation and strong top-line growth.

In other recent news, On Holding AG reported a remarkable first-quarter performance, prompting Stifel analysts to raise the company’s price target to $66.00, up from $57.00, while maintaining a Buy rating. The company achieved a 43% increase in constant currency revenue, with notable growth in the Asia-Pacific region, which saw a 129% rise. Both Wholesale and Direct-to-Consumer channels contributed to this success, with revenue increases of 38.6% and 42.4% in constant currency, respectively. Additionally, On Holding expanded its Board of Directors, appointing Helena Helmersson, a former CEO of H&M Group, as an independent member, bringing her extensive retail and sustainability expertise to the team.

Meanwhile, Piper Sandler reiterated its Overweight rating on On Holding, setting a price target of $65.00, despite recent underperformance attributed to increased short positions. In the broader retail sports industry, a significant merger was announced between Dick’s Sporting Goods (NYSE:DKS) and Foot Locker (NYSE:FL), valued at $24 per share. Bernstein analysts anticipate mixed impacts from this merger on various sportswear brands. Jefferies analyst Randal Konik maintained a Buy rating on Nike (NYSE:NKE), citing the brand’s focus on innovation and its partnership with Amazon (NASDAQ:AMZN) as factors that could help it gain market share.

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