Premium Global Brand Expansion And Apparel Momentum Will Drive Powerful Long Term Upside

Catalysts

About On Holding

On Holding designs and sells premium performance and lifestyle sportswear that spans footwear, apparel and accessories across running, training, tennis and everyday use.

What are the underlying business or industry changes driving this perspective?

• Expansion of On's premium global brand, amplified by elite athlete victories and culturally resonant collaborations with figures like Zendaya and Burna Boy, is deepening demand among younger and more affluent consumers worldwide. This supports sustained double digit revenue growth and durable pricing power that protects gross margins.
• Rapid international scaling, especially in Asia Pacific where triple digit constant currency growth and rising brand awareness in markets such as Greater China, South Korea and Southeast Asia are turning the region into a second major profit engine, is increasing geographic diversification and elevating consolidated revenue and earnings resilience.
• High velocity product innovation in core running franchises and new technologies such as LightSpray, which are moving from elite competition into mainstream offerings, is extending product cycles, raising full price sell through and enabling premium price points. Together, these factors drive higher net sales and structurally improved gross profit margins.
• Apparel emerging as a stand alone growth pillar, with unit volumes surpassing 1 million items in a quarter and strong traction in running, training and tennis, is increasing average basket size, shifting mix toward higher margin categories and expanding lifetime value per customer. This supports faster earnings growth than top line growth.
• Scaling of direct to consumer channels, through highly productive flagship stores and a tightly integrated e commerce ecosystem, is boosting customer loyalty and omnichannel lifetime value while leveraging operational efficiencies and AI driven planning tools. This is leading to rising DTC share, superior net margins and expanding adjusted EBITDA.

Assumptions

How have these above catalysts been quantified?

• This narrative explores a more optimistic perspective on On Holding compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming On Holding's revenue will grow by 21.3% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 12.3% today to 13.1% in 3 years time.
• The bullish analysts expect earnings to reach CHF 753.1 million (and earnings per share of CHF 2.33) by about September 2029, up from CHF 396.2 million today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as CHF529.3 million.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 31.1x on those 2029 earnings, up from 19.3x today. This future PE is greater than the current PE for the US Luxury industry at 15.7x.
• The bullish analysts expect the number of shares outstanding to grow by 1.29% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.44%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• On's strategy relies heavily on maintaining a premium price position supported by brand heat, athlete wins and cultural collaborations. If consumer sentiment weakens among younger or affluent customers, or if competitors successfully replicate the aesthetic and performance positioning at lower price points, demand elasticity could rise and pressure both revenue growth and gross margins.
• The company is rapidly increasing exposure to Asia Pacific, particularly Greater China, South Korea and Southeast Asia. If geopolitical tensions, regulatory shifts, currency volatility or a slowdown in discretionary spending in these markets emerge, the region could shift from growth engine to drag, negatively impacting consolidated revenue and earnings resilience.
• Triple digit growth in apparel and very strong demand for new footwear franchises are being pursued through aggressive store openings and wholesale expansion. If On overestimates long-term category demand or mis-executes inventory and capacity planning, it could face overstocking and discounting that erode gross profit margin and adjusted EBITDA margin.
• Gross margin strength currently benefits from favorable freight, tariffs timing and foreign exchange, as well as one off accrual releases. If these external cost and FX tailwinds reverse while additional U.S. tariffs fully phase in, the company may struggle to maintain its elevated margin baseline and could see a deterioration in net margins and overall profitability.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The assumed bullish price target for On Holding is $65.46, which represents up to two standard deviations above the consensus price target of $44.78. This valuation is based on what can be assumed as the expectations of On Holding's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $73.53, and the most bearish reporting a price target of just $19.89.
• In order for you to agree with the more bullish analyst cohort, you'd need to believe that by 2029, revenues will be CHF5.8 billion, earnings will come to CHF753.1 million, and it would be trading on a PE ratio of 31.1x, assuming you use a discount rate of 8.4%.
• Given the current share price of $28.36, the analyst price target of $65.46 is 56.7% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.