Telsey reiterates Outperform on On Holding stock after investor day

Telsey reiterated an Outperform rating and $43 price target on On Holding after the company surpassed its prior 2026 investor-day targets and laid out high-teens constant-currency sales growth through 2029. On targets at least 65% gross margin and 22% EBITDA margin by 2029, versus a current trailing-12-month gross margin of 64.82%, while aiming to lift direct-to-consumer mix to 50% from 45%. The company is expanding into golf and football and cited improving U.S. wholesale trends, though some analysts flagged sector-growth, spending and execution risks.

Analysis

The investable issue is not the long-range margin target; it is whether ONON can preserve premium sell-through while shifting mix toward DTC and expanding beyond its core running franchise. A higher DTC mix can lift gross margin, but it also moves fulfillment, returns, digital marketing and inventory risk onto ONON’s P&L. The key near-term read-through is US wholesale replenishment: sustained improvement over the next two quarters would validate demand normalization, while a renewed slowdown would expose elevated channel inventory and make the long-term margin bridge less credible.

Category expansion raises the addressable market but is unlikely to be earnings-accretive initially. Tennis/outdoor, and especially golf and football, place ONON against entrenched distribution and endorsement ecosystems controlled by NKE, DECK and adidas; launch investment could depress EBITDA conversion before scale emerges. The leadership transition compounds this execution risk because a consumer-brand strategy pivot is most vulnerable to inconsistent product calendars, wholesale allocation and marketing spend.

Consensus appears to be treating the targets as a straightforward continuation of premium-brand momentum. The more relevant valuation question is whether ONON can compound high-teens growth without materially increasing promotional activity; premium footwear peers lose multiple support quickly when full-price sell-through weakens. Buybacks provide some downside support, but should not be mistaken for evidence that the new-category investments will clear return thresholds.

Key Decisions for Investors

• Maintain a tactical long ONON only through the next two quarterly wholesale/DTC updates; add on evidence of accelerating US wholesale reorders and stable gross margin, not on investor-day targets. Target a 10-15% upside on estimate revisions; exit if FY guidance is cut or gross margin falls below roughly 63%, which would signal mix/promotion pressure.
• For a 6-12 month expression, use a small long ONON / short NKE pair rather than an outright ONON position. ONON has greater scope for premium-growth estimate revisions, while NKE remains more exposed to wholesale reset and promotional intensity; close the pair if ONON’s DTC growth decelerates below wholesale growth for two consecutive quarters.
• Do not chase the new-category narrative until management discloses launch cadence, marketing investment and category-level profitability. Set an alert for a material EBITDA-margin guide reduction or inventory growth materially above sales growth; either would invalidate the view that DTC mix is expanding margins.
• BAC and GS are not direct operating beneficiaries; treat their ratings/price targets as sentiment inputs rather than catalysts. The actionable catalyst is independent channel data on US full-price sell-through and retailer reorder behavior over the next 30-90 days.