ONON Stock Forecast & Price Target

On Holding is a strong and growing company, with its sales mainly coming from athletic shoes. Its unique CloudTec soles have helped it gain recognition in the market and its merchandise is sold in over 80 countries. With a balanced growth in both wholesale and company-owned channels, the company has consistently achieved strong full-price selling, as seen in its 1Q results. Management's increased FY26 margin outlook and a strong 1Q beat show that the company is on track to deliver sustainable long-term sales and earnings growth. Despite facing some headwinds from tariffs, the company has been able to expand its gross margins through supply-side efficiencies and full-price selling, and is expected to continue this trend in the future. The company's focus on investing in brand-building initiatives and expanding DTC share presents further growth opportunities and potential for margin expansion. However, some risks to consider include potential economic downturns affecting consumer demand and the company's dependence on third-party partners and suppliers. We believe the stock currently warrants a premium multiple due to its strong top-line momentum and leading margins.

On Holding is managing its inventory well ahead of 2027 innovation by intentionally keeping the market "clean" and achieving a strong gross margin beat in the midst of a promotional market. However, their outlook for FY26 sales growth of "at least" 23% YoY in CC is primarily driven by volume and a skewed sales cadence, and the company's future profitability and expansion opportunities depend on further investments in marketing and brand-building to increase awareness and reach new profit milestones. The company's strong execution in its strategy to become a premium, innovation-led brand is evident in its ability to effectively manage its inventories and achieve a strong sales beat, but its reliance on volume and wholesale growth may hinder its long-term profitability.