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Investing.com -- Morgan Stanley analysts have identified key winners and losers in the apparel sector, pointing to On Holding (NYSE:ONON) as a top stock to own while recommending investors avoid Under Armour (NYSE:UAA).
The investment bank’s latest research suggests certain apparel companies have significant growth potential that may not be fully recognized by the market, while others face overly optimistic revenue expectations.
Their analysis utilized a comprehensive scorecard with ten specific criteria to evaluate each company’s potential to reach higher revenue tiers.
On Holding emerged as the clear winner in Morgan Stanley’s assessment:
1. On Holding (ONON) - The Swiss athletic footwear company received a strong Overweight rating from Morgan Stanley analysts, who expressed increased confidence in their bullish outlook following their evaluation.
Their research indicates ONON has characteristics that could enable a path to the $7-10 billion revenue tier over time, a scale potential that may exceed current market expectations. Based on this positive assessment, Morgan Stanley has adjusted their bull case for ONON to $122 per share.
On Holding AG reported that its Q2 2025 earnings and revenue missed analyst expectations. In other news, TD Cowen lowered its price target on the company, while Bernstein reiterated an Outperform rating.
2. Under Armour (UAA) - In stark contrast, Morgan Stanley maintains an Underweight rating on Under Armour, with analysts suggesting the company may fall short of consensus revenue expectations.
Their scorecard analysis indicates UAA could struggle to reach the approximately $5 billion revenue threshold that the market currently anticipates. This negative outlook reinforced the bank’s bearish stance on the athletic apparel maker.
In recent developments, Under Armour, Inc. has received mixed analyst ratings, with Rothschild Redburn downgrading the stock to Neutral while both UBS and Stifel reiterated Buy ratings.
Morgan Stanley’s research also evaluated other apparel retailers including Abercrombie & Fitch (NYSE:ANF), which showed positive characteristics similar to On Holding, while American Eagle Outfitters (NYSE:AEO) and Gap (NYSE:GAP) joined Under Armour in potentially falling short of market revenue expectations.
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