Jefferies downgrades On Holding stock to Underperform on growth concerns

On Holding AG (ONON) was downgraded by Jefferies to Underperform with a $40 price target, citing concerns over peak sales growth in 2025, slowing U.S. expansion, and potential market share shifts to Nike. This bearish view contrasts with ONON's robust second-quarter performance, which featured a 38% currency-adjusted revenue increase and improved margins, prompting several other analysts, including BTIG, Williams Trading, Truist, and UBS, to reiterate Buy ratings with price targets ranging from $69 to $75, reflecting a divergence in analyst sentiment regarding the company's growth trajectory.

Analysis

On Holding AG (ONON) presents a polarized investment case, underscored by a significant divergence in analyst sentiment. Jefferies has issued a notable downgrade to Underperform with a $40 price target, citing a forward-looking thesis that 2025 will represent peak sales growth. This bearish outlook is predicated on slowing U.S. retail expansion and a potential moderation in sell-in during 2026 as retailers may shift orders back to Nike. Jefferies further projects sales and EBITDA estimates 5% and 10% below consensus, respectively, and anticipates valuation multiple compression due to a limited total addressable market from high pricing and narrow product assortment. This contrasts sharply with the company's recent exceptional performance, including a 38% currency-adjusted revenue increase and significant margin expansion in the second quarter. This robust execution has prompted bullish reiterations from firms like BTIG, Williams Trading, Truist, and UBS, with price targets ranging from $69 to $75. UBS even anticipates a potential upward revision to the company's 28% fiscal 2025 sales growth outlook. A more cautious but still positive stance is held by TD Cowen, which lowered its price target to $60 due to foreign exchange and tariff concerns, highlighting external risks despite maintaining a Buy rating.

Key Decisions for Investors

• Investors should weigh Jefferies' forward-looking concerns about peak growth and future competition against the company's demonstrated strong execution and the bullish consensus from several other analysts.
• Monitor key performance indicators such as U.S. door count growth, channel sell-through data, and management commentary on market share to validate either the bearish or bullish thesis.
• Given the wide dispersion in price targets from $40 to $75, consider the significant valuation risk and potential for multiple compression if the growth deceleration forecasted by Jefferies materializes.