On Holding AG (ONON)

Key Updates

On Holding AG declined 5.69% to $37.18 on March 25th, breaking below the $39 support established in previous sessions and accelerating YTD losses to -20.01%. The selloff intensifies despite no material negative news, with the stock now testing its lowest levels since the post-earnings decline. The continued weakness reflects persistent market skepticism regarding the company's 23% constant currency growth guidance for 2026, which investors view as a significant deceleration from 2025's 30% expansion despite strong fundamentals and margin improvement initiatives.

Current Trend

ONON has entered a sustained downtrend with YTD losses of -20.01% and 6-month losses of -15.35%, marking one of the stock's most challenging periods since its public listing. The stock failed to hold the $39 support level tested on March 19th and 24th, now trading at $37.18 and establishing a clear pattern of lower highs and lower lows. The 21.63% monthly decline demonstrates accelerating negative momentum, with each recovery attempt met by renewed selling pressure. The stock has declined in 4 of the last 5 sessions, with the brief 3.29% rebound on March 24th proving insufficient to reverse the broader trend. Technical deterioration is evident across all timeframes, with the 1-day (-6.09%) and 5-day (-4.79%) declines confirming short-term weakness. The current price action suggests investors are repricing the stock based on growth deceleration concerns rather than reacting to fundamental deterioration in the business model.

Investment Thesis

The investment thesis centers on On's transformation into a premium athletic brand with sustainable competitive advantages through product innovation, manufacturing automation, and multi-category expansion. The company delivered exceptional 2025 results with CHF 3 billion in net sales (30% growth YoY, 35.6% constant currency), gross margin expansion to 62.8% from 60.6%, and adjusted EBITDA margin improvement to 18.8% from 16.7%. The thesis emphasizes three strategic pillars: (1) technological differentiation through LightSpray robotic manufacturing reducing supply chain risk and tariff exposure, with the new 32-robot South Korea facility capable of producing 1,000 pairs daily and planned expansion to the U.S. and Europe; (2) geographic diversification with APAC growing 96.4% YoY, demonstrating significant runway in underpenetrated markets; and (3) channel optimization with DTC growing 33.7% versus wholesale at 27.5%, improving margin profile. The 2026 guidance projects at least 23% constant currency growth to CHF 3.44 billion with gross margins reaching minimum 63% and adjusted EBITDA margins of 18.5-19.0%, indicating continued profitability expansion despite growth moderation. The premium positioning targeting affluent consumers provides insulation from lower-income spending pressures affecting mass-market competitors. Source

Thesis Status

The investment thesis remains fundamentally intact but faces valuation compression as the market adjusts expectations for normalized growth rates. The 20% YTD decline reflects investor concern over growth deceleration from 30% to 23% rather than fundamental business deterioration. All operational metrics support the thesis: Q4 sales beat expectations at CHF 743.8 million versus CHF 724.3 million consensus, gross margins continue expanding toward the 63% target, and regional diversification is accelerating with APAC growing 85.1% in constant currency. The LightSpray manufacturing expansion addresses critical supply chain vulnerabilities and positions the company favorably against potential tariff headwinds, with management noting that current 10-15% blanket tariffs represent significant improvement versus the previous 20% rates on Vietnam and Indonesia production. However, the thesis faces near-term headwinds from competitive intensity concerns and pricing environment challenges flagged by analysts, creating a disconnect between strong execution and market sentiment. The stock's inability to hold support levels despite positive fundamental developments suggests investors are demanding a lower valuation multiple for the projected growth rate, requiring either accelerated execution or time for the market to re-rate the premium quality of earnings. Source

Key Drivers

Growth guidance disappointment remains the primary driver of the selloff, with the 23% constant currency growth target for 2026 representing a 700 basis point deceleration from 2025's 30% pace, triggering the initial 9-11% post-earnings decline that has now extended to -20% YTD. Analyst concerns about competitive intensity and pricing environment challenges in 2026 have amplified selling pressure, with commentary suggesting the premium positioning strategy may face headwinds and current valuation may not fully reflect these risks. The manufacturing automation expansion through the 32-robot South Korea facility and planned U.S. and European factories represents a positive long-term catalyst for supply chain resilience and margin protection, though benefits remain future-oriented. Tariff dynamics provide mixed signals, with management highlighting that lower 10-15% blanket tariff rates following a Supreme Court decision could provide upside versus the previous 20% duties on Vietnam and Indonesia sourcing. The company's achievement of its 2026 strategic targets (CHF 3.55 billion sales, 18% EBITDA margin) in 2025—one year early—demonstrates execution strength but also raises questions about the sustainability of growth rates as the company scales beyond CHF 3 billion in annual revenue.

Technical Analysis

ONON has broken critical technical support at $39, which had served as a floor during the March 19th and 24th sessions, now trading at $37.18 and establishing a new YTD low. The stock exhibits a clear downtrend pattern with lower highs at $42.18 (March 13th implied), $39.42 (March 24th), and now $37.18, accompanied by lower lows as each support level fails. The 6.09% single-day decline on March 25th represents the sharpest drop since the post-earnings selloff, indicating acceleration of selling pressure rather than stabilization. Volume patterns suggest institutional repositioning, with the magnitude of the decline occurring without new negative catalysts pointing to systematic de-risking or position liquidation. The stock is now down 21.63% over one month and 20.01% YTD, placing it in oversold territory by traditional metrics. Immediate support appears around the $37 psychological level, with resistance now established at $39 (former support) and $40. The failure to sustain the March 24th recovery attempt above $39 confirms the bearish technical setup, with momentum indicators pointing to continued near-term weakness absent a fundamental catalyst. The current price action suggests the market is seeking a new equilibrium valuation in the $35-37 range unless operational improvements or guidance revisions emerge.

Bull Case

• Exceptional operational execution with Q4 sales of CHF 743.8 million beating consensus CHF 724.3 million, gross margin expansion to 62.8% from 60.6%, and adjusted EBITDA margin reaching 18.8% versus 16.7% prior year, demonstrating pricing power and operational leverage in a competitive environment. Source
• APAC region explosive growth at 96.4% YoY (85.1% constant currency in Q4) provides substantial geographic diversification and demonstrates significant runway in underpenetrated markets, reducing dependence on mature North American and European markets. Source
• LightSpray robotic manufacturing expansion with 32-robot South Korea facility producing 1,000 pairs daily and planned U.S. and European factories addresses supply chain vulnerabilities, reduces tariff exposure, and creates competitive moat through proprietary technology that condenses 200-step process into single automated procedure. Source
• Favorable tariff environment with current 10-15% blanket rates representing significant improvement versus previous 20% duties on Vietnam and Indonesia (which account for 90% and 10% of production respectively), providing potential gross margin upside as management indicated lower rates could boost profitability. Source
• DTC channel acceleration at 33.7% growth versus wholesale 27.5% improves margin profile and customer relationships, while 2026 guidance for minimum 63% gross margin and 18.5-19.0% adjusted EBITDA margin indicates continued profitability expansion despite revenue growth moderation. Source

Bear Case

• Growth deceleration from 30% in 2025 to projected 23% constant currency growth in 2026 represents significant momentum loss and disappointed investor expectations, triggering the initial 9-11% post-earnings decline that has now extended to -20% YTD as the market reprices growth assumptions. Source
• Rising competitive intensity and tougher pricing environment in 2026 threaten the premium positioning strategy, with analyst concerns that current valuation may not fully reflect these risks as the company scales beyond CHF 3 billion and faces intensified competition from Nike and Adidas. Source
• Net income declined 15.9% to CHF 203.7 million despite revenue growth, reflecting heavy reinvestment in retail footprint and multi-category expansion that pressures near-term profitability and raises questions about return on invested capital as growth moderates. Source
• Technical breakdown below $39 support with accelerating momentum (-6.09% single day, -21.63% one month) and inability to sustain recovery attempts indicates systematic de-risking and potential for further downside toward $35 absent fundamental catalysts. Source
• LightSpray manufacturing remains in early stages with limited production capacity (initially producing limited supply of $330 Cloudboom Strike and Cloudmonster 3 Hyper models), meaning supply chain benefits and tariff mitigation are largely future-oriented rather than immediate drivers, while 90% Vietnam sourcing concentration persists. Source