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On Holding AG, the Swiss-based sportswear and footwear company, has been making waves in the global market with its innovative products and strong brand momentum. As the company navigates through a complex landscape of opportunities and challenges, investors are closely watching its performance and future prospects. According to InvestingPro analysis, the company maintains a GOOD financial health score of 2.89, though current market prices suggest the stock is trading above its Fair Value. This comprehensive analysis delves into On Holding’s financial performance, growth strategies, and market position, while also examining the potential risks and opportunities that lie ahead.
Financial Performance
On Holding has demonstrated robust financial performance in recent quarters, showcasing its ability to capture market share and drive growth. In the second quarter of 2025, the company reported an impressive 38% constant currency sales growth, significantly surpassing the consensus estimate of 27%. The company’s revenue growth remains strong at 35.67% over the last twelve months, supported by an impressive gross profit margin of 61%. Want deeper insights? InvestingPro offers 14 additional tips about On Holding’s performance and prospects. This strong performance was attributed to broad-based strength across the company’s product offerings.
Looking at the full fiscal year 2025, analysts project a 23% reported sales growth and a 27% constant currency growth, aligning with the company’s guidance. However, some analysts anticipate that the EBITDA margin may fall slightly below guidance at 16.8%.
The company’s earnings per share (EPS) forecasts reflect optimism about its future profitability. For the fiscal year 2025 (FY1), the EPS is estimated at 0.59, while for fiscal year 2026 (FY2), it is projected to reach 1.26. These projections suggest a significant improvement in the company’s bottom line over the next two years.
Brand Momentum and Growth Strategy
On Holding’s success can be largely attributed to its strong brand momentum and effective growth strategy. The company has positioned itself as a premium offering in the broader footwear space, focusing on innovative designs and high-performance products. This positioning has resonated well with consumers, leading to increased brand awareness and loyalty.
A key component of On Holding’s growth strategy is its direct-to-consumer (DTC) approach. The company has been actively expanding its DTC channels, which not only provide higher margins but also allow for better control over the brand experience. Analysts highlight this DTC-led strategy as a significant factor in On Holding’s early stages of global growth.
Product innovation continues to be a driving force for the company. New product launches are expected to contribute to future growth, with the potential to attract new customers and encourage repeat purchases from existing ones. Additionally, On Holding has implemented strategic price increases, which are anticipated to help offset some of the challenges posed by tariffs and contribute to sales and EBITDA margin expansion.
Market Position and Competition
On Holding has successfully carved out a niche for itself in the competitive footwear market. Its premium positioning and focus on performance have helped differentiate the brand from competitors. The company’s products, particularly its running shoes, have gained a reputation for comfort and innovation, leading to strong consumer interest and market-leading Net Promoter Scores (NPS).
However, the competitive landscape is intensifying. Major players in the industry, such as Nike, are focusing on regaining market share in the running category. This increased competition could potentially impact On Holding’s growth trajectory and market position in the future.
Despite these competitive pressures, On Holding’s diverse geographical sales base provides some insulation against market-specific risks. The company’s global presence allows it to capitalize on growth opportunities in various regions and mitigate the impact of localized economic challenges.
Future Outlook and Challenges
While On Holding’s future looks promising, the company faces several challenges that could impact its performance. One of the most significant concerns is the potential impact of tariffs on the company’s cost structure. Analysts estimate that tariffs could increase On Holding’s cost of goods sold (COGS) by 25-30%, posing a significant risk to its earnings.
The company’s sourcing strategy also presents a potential vulnerability. Up to 90% of On Holding’s sourcing is reported to come from Vietnam, which could expose the company to supply chain risks and the aforementioned tariff issues.
Foreign exchange (FX) headwinds present another challenge for On Holding. As a global company with significant international sales, fluctuations in currency exchange rates can impact both revenues and margins.
Despite these challenges, On Holding is expected to continue its growth trajectory. Analysts project a 22% sales compound annual growth rate (CAGR) over the 2024-2028 period, along with an EBIT margin increase of 360 basis points to 12.3% by 2028. Current analyst consensus is notably bullish at 1.52 (on a scale where 1 is Strong Buy), with price targets ranging from $40.11 to $79.07. Discover more detailed analysis and projections with InvestingPro’s comprehensive research reports, available for over 1,400 US stocks. This growth is expected to be driven by a 28% CAGR in the company’s direct-to-consumer sales.
Bear Case
How might increased tariffs impact On Holding’s profitability?
The potential impact of tariffs on On Holding’s profitability is a significant concern for investors. With estimates suggesting that tariffs could increase the company’s COGS by 25-30%, there is a real risk of margin compression. While On Holding has implemented price increases to counteract these challenges, it remains to be seen whether these will fully offset the tariff impact without negatively affecting demand.
Moreover, the company’s heavy reliance on sourcing from Vietnam (up to 90% of its production) makes it particularly vulnerable to any trade-related disruptions or policy changes affecting that region. This concentration in sourcing could lead to supply chain risks and potentially higher costs if alternative sourcing arrangements need to be made quickly.
Can On Holding maintain its growth trajectory in an increasingly competitive market?
As the footwear market becomes increasingly competitive, with major players like Nike focusing on regaining market share in the running category, On Holding may face challenges in maintaining its rapid growth trajectory. The company’s premium positioning and focus on innovation have been key differentiators, but as competitors catch up and potentially offer similar features at lower price points, On Holding may find it harder to justify its premium pricing to consumers.
Additionally, the company’s valuation metrics, such as EV/EBITDA and P/E ratios, indicate a high valuation relative to earnings growth. This suggests that much of the company’s future growth potential may already be priced into the stock, leaving little room for error in execution or market conditions.
Bull Case
How does On Holding’s DTC strategy position it for future growth?
On Holding’s direct-to-consumer (DTC) strategy is a key driver of its growth potential. The DTC approach allows the company to capture higher margins by cutting out intermediaries and provides greater control over the brand experience. Analysts project a 28% CAGR in DTC sales over the 2024-2028 period, which is expected to be a significant contributor to the company’s overall growth.
The DTC strategy also provides On Holding with valuable customer data and insights, enabling more targeted marketing and product development. This direct relationship with consumers can foster brand loyalty and potentially lead to higher customer lifetime value. As the company continues to expand its DTC channels, it may be able to further improve its profitability and maintain its premium brand positioning.
What potential does On Holding have for international expansion?
On Holding’s diverse geographical sales base positions it well for continued international expansion. The company has already demonstrated strong performance across various markets, and its global brand awareness continues to grow. This international presence not only provides growth opportunities but also helps mitigate risks associated with any single market.
As On Holding expands into new markets, it can leverage its premium brand positioning and innovative products to capture market share. The company’s success in established markets can serve as a blueprint for entering and growing in new regions. Furthermore, international expansion can help diversify the company’s revenue streams and potentially reduce its exposure to tariffs and other market-specific risks.
SWOT Analysis
Strengths:
- Strong brand momentum and consumer loyalty
- Innovative product offerings
- Effective direct-to-consumer strategy
- Premium market positioning
- Diverse geographical sales base
Weaknesses:
- High exposure to tariffs due to sourcing concentration
- Potential margin pressure from increased costs
- Reliance on Vietnam for sourcing (up to 90%)
Opportunities:
- Continued international expansion
- New product launches and innovations
- Potential for strategic price increases
- Growth in direct-to-consumer channels
Threats:
- Intensifying competition in the footwear market
- Macroeconomic challenges and consumer spending shifts
- Foreign exchange headwinds
- Potential supply chain disruptions
Analysts Targets
- Barclays: $69.00 (August 13th, 2025)
- Truist Securities: $69.00 (May 14th, 2025)
- KeyBanc: $68.00 (May 14th, 2025)
- Citi Research: $60.00 (April 28th, 2025)
- Goldman Sachs: $57.00 (February 12th, 2025)
This analysis is based on information available up to August 14, 2025, and reflects the market conditions and analyst opinions as of that date.
InvestingPro: Smarter Decisions, Better Returns
Gain an edge in your investment decisions with InvestingPro’s in-depth analysis and exclusive insights on ONON. Our Pro platform offers fair value estimates, performance predictions, and risk assessments, along with additional tips and expert analysis. Explore ONON’s full potential at InvestingPro.
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