Raymond James adds On Holding stock on pullback, removes Deckers

Raymond James added On Holding (NYSE:ONON) to its Analyst Current Favorites list and said the recent 21% year-to-date pullback has created an attractive entry point, valuing the stock at about 10x EV/EBITDA versus an expected 22% EBITDA growth in 2027. The firm cited 62.8% gross margin, 30% revenue growth, pricing power, brand momentum, and margin expansion as key long-term supports, while noting CEO transition concerns and higher oil prices have pressured the shares. Raymond James also kept an Outperform on Deckers, but sees a more compelling opportunity in On Holding.

Analysis

ONON looks like a classic “good business, wrong timing” setup: the fundamental runway is still being re-rated by the market because investors are discounting governance uncertainty and input-cost noise more heavily than medium-term earnings power. The important second-order effect is that premium athletic brands with true pricing power can often pass through freight and tariff shocks with a lag, so the near-term margin pressure is more of a sentiment overhang than a structural thesis break.

The leadership transition is the key catalyst and the key risk. In the next 1-2 quarters, the stock likely trades on headline continuity rather than execution, which means any sign that the co-founders can preserve brand discipline and product cadence should compress the governance discount quickly; conversely, any distribution misstep or margin guide-down would likely cause a sharper de-rating because the market is already primed to punish uncertainty.

The market may be underestimating how much multiple support comes from the business mix rather than just growth. If the company can sustain premium sell-through while broadening channels, the mix shift can offset macro cost pressure and keep EBITDA compounding faster than consensus expects; that matters because names with both growth and margin expansion can re-rate even before earnings inflect.

Relative to peers, the opportunity is not just “buy the dip,” but “own the cleaner long-duration compounder versus slower-growth athletic exposure.” The contrarian view is that this pullback may be an overreaction if the transition proves smooth, but it would become a value trap if management attention shifts from brand building to fixing operational noise over multiple quarters.

Key Decisions for Investors

• Initiate a tactical long ONON over 3-6 months on weakness, sized as a reopening/leadership-transition recovery trade; target a 15-20% multiple re-rating if the next update confirms brand and margin stability, with a stop if gross margin or forward guidance deteriorates.
• Use a pair trade: long ONON / short a more mature premium athletic peer basket over 1-2 quarters to isolate idiosyncratic re-rating from sector beta; this favors ONON if investors rotate toward higher-growth compounders with clearer 2026-2027 earnings leverage.
• Buy ONON call spreads into the next earnings or guidance event if implied volatility is reasonable; this gives upside exposure to a sentiment rebound while capping downside if the CEO transition remains a drag.
• Avoid chasing DECK on this signal alone; use it only as a hedge or funding source in a relative-value basket, since the better risk/reward now appears to be in the name with more room for multiple expansion rather than the steadier incumbent.
• Set a 30-60 day catalyst watchlist around distribution updates, margin commentary, and any sign of co-founder-led execution continuity; if those are clean, add on strength because the market will likely de-risk the governance story faster than expected.