Key Updates
On Holding AG declined 6.99% to $38.56 since the last report on March 10th, extending the post-earnings correction to a cumulative 17.04% YTD decline. The selloff intensified despite no new negative catalysts, suggesting continued investor digestion of the 23% constant currency growth guidance for 2026—a deceleration from 35.6% in 2025. The stock has now retraced all gains from the brief March 10th recovery, with selling pressure accelerating through the $40 psychological support level that held during the previous week's consolidation.
Current Trend
On Holding trades in a confirmed downtrend with YTD performance of -17.04%, significantly underperforming broader equity markets. The stock has declined across all timeframes: -2.23% (1-day), -11.09% (5-day), -14.88% (1-month), and -10.10% (6-month). Following the March 3rd earnings release, ONON broke below the $40-$42 support zone that had provided a floor during the February-March period. The current price of $38.56 represents a new multi-month low, with no established support levels visible in recent trading history. The 6.99% decline since March 10th confirms that the brief recovery attempt failed to establish sustainable momentum, indicating continued distribution by institutional investors reassessing the company's growth trajectory.
Investment Thesis
The investment thesis centers on On Holding's premium positioning in the athletic footwear market, supported by operational excellence and strategic manufacturing innovation. The company delivered CHF 3 billion in 2025 net sales with 30.0% reported growth (35.6% constant currency), while expanding gross margins to 62.8% from 60.6% and adjusted EBITDA margins to 18.8% from 16.7%. The DTC channel grew 33.7% and APAC surged 96.4%, demonstrating strong brand momentum across channels and geographies. For 2026, management projects minimum 23% constant currency growth to CHF 3.44 billion with gross margins reaching at least 63.0%. The automated LightSpray manufacturing facilities in South Korea, with plans for U.S. and European expansion, address supply chain vulnerabilities while reducing tariff exposure—particularly relevant given the company's 90% Vietnam sourcing concentration. The Supreme Court tariff decision potentially provides upside, as the 10-15% blanket rate represents significant savings versus the previous 20% duty on Vietnam and Indonesia production. However, the thesis faces headwinds from decelerating growth rates, rising competitive intensity in premium footwear, and valuation concerns following the 17% YTD decline.
Thesis Status
The investment thesis remains structurally intact but faces near-term execution challenges. On delivered record financial performance with all key metrics exceeding expectations: Q4 sales of CHF 743.8 million beat estimates of CHF 724.3 million, adjusted EBITDA of CHF 131 million surpassed projections of CHF 112.4 million, and full-year margins expanded ahead of schedule. The company is on track to achieve its strategic target of CHF 3.55 billion in sales with 18% EBITDA margin by year-end 2026. Manufacturing innovation through the 32-robot South Korean facility—capable of producing 1,000 pairs daily—validates the LightSpray technology's scalability and positions On to compete more effectively against Nike and Adidas. The tariff environment has improved materially with potential 10-15% rates versus previous 20% duties. However, the thesis is challenged by the growth deceleration from 35.6% to 23% constant currency, which investors interpret as market share saturation in core segments. The 15.9% decline in net income to CHF 203.7 million, despite revenue growth, reflects increased reinvestment requirements that may pressure near-term profitability. Analyst concerns about premium positioning sustainability in a competitive 2026 environment and the stock's -17% YTD performance suggest the market is repricing growth expectations downward.
Key Drivers
The primary driver remains the market's reaction to decelerating growth guidance, which has dominated price action since the March 3rd earnings release. The 23% constant currency growth projection for 2026, while robust in absolute terms, represents a significant slowdown from 35.6% in 2025, disappointing investors who anticipated sustained momentum. Analysts express concerns that premium positioning may face challenges amid rising competitive intensity and a tougher pricing environment. The manufacturing innovation story provides a secondary positive catalyst, with the South Korean robotic facility demonstrating On's commitment to supply chain resilience and tariff mitigation. The tariff environment has improved, with CEO Martin Hoffmann indicating that lower U.S. tariff rates following a Supreme Court decision could provide additional upside. Regional performance divergence continues, with APAC growing 96.4% while Americas and EMEA moderate, suggesting geographic expansion opportunities remain but core market penetration may be maturing. The 15.9% net income decline despite revenue growth signals that reinvestment requirements are intensifying, potentially compressing margins in the near term as the company expands its retail footprint and multi-category product portfolio.
Technical Analysis
On Holding exhibits a deteriorating technical structure with the stock trading at $38.56, down 17.04% YTD and establishing new multi-month lows. The March 3rd earnings release triggered a breakdown below the $40-$42 support zone that had contained selling pressure throughout February. The brief recovery to $41.46 on March 10th failed at the breakdown level, confirming resistance and resuming the downtrend. Current price action shows accelerating selling pressure with the 6.99% decline since March 10th occurring on no new fundamental catalysts, indicating technical selling and position liquidation. The stock has violated all short-term moving averages and shows no signs of stabilization. Immediate resistance sits at $40.00 (psychological level and former support), followed by $41.46 (March 10th recovery high) and $42.00 (pre-earnings support). Support levels are unclear given the new low establishment, with the next potential floor dependent on buyer emergence. Volume patterns suggest continued distribution, with selling intensity remaining elevated nearly two weeks post-earnings. The technical setup favors further downside until a capitulation event or fundamental catalyst emerges to shift sentiment.
Bull Case
- Record operational performance with expanding margins: On delivered CHF 3 billion in 2025 sales with gross margins expanding to 62.8% from 60.6% and adjusted EBITDA margins reaching 18.8% versus 16.7% prior year, demonstrating pricing power and operational leverage. Q4 adjusted EBITDA of CHF 131 million exceeded analyst estimates of CHF 112.4 million by 16.6%, validating the company's ability to drive profitability while investing in growth. Source: Business Wire
- Favorable tariff environment provides significant cost savings: The Supreme Court decision reducing U.S. tariffs to 10-15% blanket rates represents substantial savings versus the previous 20% duty on Vietnam and Indonesia, where On sources 100% of its production. CEO Martin Hoffmann indicated this could provide additional upside to guidance, potentially improving gross margins beyond the projected 63% minimum for 2026. Source: Reuters
- Manufacturing innovation addresses supply chain vulnerabilities: The South Korean facility with 32 robots producing 1,000 pairs daily represents a 30-fold increase in robotic capacity, with plans for additional automated factories in the U.S. and Europe. The LightSpray technology condenses 200 steps into a single automated procedure, reducing time-to-market and tariff exposure while positioning On to compete more effectively against Nike and Adidas. Source: Reuters
- Exceptional APAC growth demonstrates international expansion potential: The Asia-Pacific region grew 96.4% year-over-year in 2025, with Q4 constant currency growth of 85.1%, indicating massive whitespace opportunity in underpenetrated markets. This geographic diversification reduces dependence on mature markets and provides a long-term growth engine as the company scales distribution and brand awareness. Source: Business Wire
- Premium positioning insulates from lower-income consumer weakness: On's focus on affluent consumers and premium product positioning has helped navigate the spending slowdown among lower-income shoppers in the U.S. market, providing resilience in a challenging retail environment. The company's ability to maintain pricing power while growing DTC 33.7% demonstrates strong brand equity and customer loyalty. Source: Reuters
Bear Case
- Significant growth deceleration signals market saturation: The 2026 guidance of 23% constant currency growth represents a sharp deceleration from 35.6% in 2025, disappointing investors and triggering an 11% single-day decline post-earnings. This slowdown suggests the company may be reaching penetration limits in core markets, with the moderation occurring despite favorable tariff conditions and operational execution. Source: CNBC
- Net income declined 15.9% despite revenue growth: Full-year net income fell to CHF 203.7 million from CHF 242.3 million as the company reinvested in retail expansion and multi-category growth, indicating that achieving the next phase of scale requires margin compression. This trend may continue as competitive pressures intensify and reinvestment requirements remain elevated. Source: Business Wire
- Valuation may not reflect rising competitive risks: Analysts express concerns that the stock's current valuation does not fully reflect challenges from rising competitive intensity and a tougher pricing environment in 2026. The premium positioning strategy faces increasing pressure as larger competitors Nike and Adidas defend market share in the performance running segment. Source: CNBC
- Heavy concentration in Vietnam creates supply chain risk: Despite the new South Korean facility, On still sources 90% of its shoes from Vietnam and 10% from Indonesia through third-party manufacturers. This geographic concentration creates vulnerability to regional disruptions, labor cost inflation, or adverse policy changes, with the automated facilities currently representing minimal production volume. Source: Reuters
- Limited LightSpray production constrains near-term impact: The automated manufacturing technology currently produces only limited quantities of the $330 Cloudboom Strike model, with the Cloudmonster 3 Hyper launching in limited supply on March 5. The technology's contribution to overall production remains minimal, limiting its ability to materially impact margins or supply chain resilience in 2026. Source: Bloomberg