1 Growth Stock Down 34% to Buy Right Now

On Holding (ONON), an athleisure company, reported robust Q2 2025 results, including a 38% year-over-year revenue increase and expanding gross margins, though net income remained negative due to growth investments. Despite management raising full-year guidance, including profitability, the stock has declined 34% from its peak amid investor concerns over increased tariffs on Southeast Asian production, persistent global inflation, and decelerating sales growth as the company matures. Analysts, however, view the current valuation as an attractive entry point, citing management's confidence in absorbing costs through scaling and premium pricing, projecting significant upside potential.

Analysis

On Holding (ONON) demonstrated robust operational performance in Q2 2025, reporting a 38% year-over-year revenue increase on a currency-neutral basis, driven by significant growth in clothing (+76%), accessories (+143%), and footwear (+36%). The company's direct-to-consumer sales surged 54%, underscoring strong brand resonance with its affluent customer base, and gross margin expanded to 61.5% from 59.9% year-over-year.

Despite this strong growth and management raising full-year guidance, including profitability, ONON's stock has declined 34% from its highs. This downturn is primarily attributed to investor concerns over increased tariffs on products manufactured in Southeast Asia (Vietnam tariffs rose to 40%, Indonesia to 39%) and the persistent impact of global inflation. Additionally, the market is factoring in a natural deceleration of sales growth as the company scales, which can temper premium valuations.

CEO Martin Hoffmann maintains an optimistic outlook, asserting that the company's ability to scale operations and maintain premium pricing will enable it to absorb rising costs and improve profitability, despite Q2 net income being negative due to ongoing growth investments. Analysts view the current valuation, at a forward P/E of 26 and P/S of 4.4, as an attractive entry point, with an average Wall Street target price suggesting a 64% upside over the next 12-18 months.

Key Decisions for Investors

• Consider ONON for long-term growth portfolios, leveraging its strong brand momentum, expanding gross margins, and management's confidence in absorbing costs through scale and premium pricing.
• Monitor the ongoing impact of escalating tariffs and persistent global inflation on future profitability, as these external factors could pressure margins despite management's optimistic outlook.
• Evaluate the stock's current valuation against its decelerating growth rate, recognizing that while analysts see an attractive entry point, growth stock premiums can be sensitive to slowing momentum.