Williams Trading has revised its recommendation for On Holding (ONON), shifting its stance from a 'Buy' to a 'Hold' rating. This adjustment comes with a reduced price target, signaling concerns about the company's strategic decisions regarding product segmentation. While On Holding has shown robust performance in its apparel and footwear sectors, the firm anticipates challenges in wholesale growth and potential pressure on profit margins due to rising direct-to-consumer costs.
Despite this downgrade, On Holding demonstrated strong financial performance in Q3 2025, exceeding 1 million units sold in apparel and seeing significant growth in footwear sales. This led to an upward revision of its full-year 2025 constant currency sales growth forecast. However, the report suggests that investors might find more compelling opportunities in the AI sector, particularly in an undervalued stock that could benefit from current economic trends.
Analyst Downgrade: Product Segmentation Woes
Williams Trading recently adjusted its outlook on On Holding (ONON), downgrading the stock from a 'Buy' to a 'Hold' rating and setting a revised price target of $47, down from an earlier projection of $55. This revision stems from the firm's assessment that On Holding's recent decisions regarding product segmentation are proving detrimental to its overall market performance. Analysts are particularly wary of the anticipated slowdown in wholesale order growth, especially within the Americas for the fiscal year 2026, and a persistent deceleration in Europe. The firm also highlighted that the increasing expenses associated with the company's direct-to-consumer channels are likely to exert downward pressure on its earnings before interest and taxes (EBIT) margins over the foreseeable future, making the stock less attractive from an investment perspective.
The core of Williams Trading's concerns lies in the belief that On Holding's approach to segmenting its product lines is not yielding the desired positive results and may, in fact, be creating headwinds for the company. This strategic misstep, according to the analysis, is expected to manifest in reduced wholesale order volumes, impacting revenue streams from traditional retail partners. Furthermore, as On Holding expands its direct-to-consumer sales, the associated costs—such as marketing, logistics, and customer service—are projected to rise, compressing the company's profitability. This combination of slowing wholesale growth and increasing operational expenses from direct sales channels painted a cautious picture for Williams Trading, leading to their decision to lower the stock's rating and price target, advising investors to take a more neutral stance on the company's shares.
Growth Amidst Challenges: A Mixed Performance
Despite the cautionary note from Williams Trading, On Holding (ONON) demonstrated a robust performance in the third quarter of 2025. A significant highlight was the apparel category, which for the first time surpassed the milestone of 1 million units sold, registering an impressive sales increase of 86.9% to reach CHF50.1 million. The company's foundational footwear segment also maintained its momentum, with sales climbing by 21.1% to hit CHF731.3 million. These positive results prompted On Holding to revise its full-year 2025 constant currency sales growth guidance upwards to 34%, an increase from its previous forecast of at least 31%, indicating strong underlying demand and successful product launches in these key areas.
On Holding is renowned for developing and distributing high-performance sports products globally, including athletic footwear, apparel, and accessories catering to diverse activities such as running, outdoor adventures, training, and everyday wear, as well as tennis. The company's ability to achieve such growth, particularly in its apparel division and sustained strength in footwear, suggests that its brand appeal and product innovation continue to resonate with consumers. This performance contrasts with the concerns raised by Williams Trading, showcasing a complex financial landscape for On Holding. While operational efficiencies and product strategies are under scrutiny by analysts, the company's sales figures reflect a strong market presence and consumer loyalty, which are critical factors for long-term success in the competitive sportswear industry. Investors are now tasked with balancing these strong sales indicators against the analysts' warnings regarding future growth deceleration and margin pressures.