ON Holding AG
Company: On Holding AG (ONON)
Ticker: NYSE: ONON
Sector: Athletic Apparel & Footwear
Key Narrative: This company is a revolutionary footwear and athletic apparel company.
This stock is a growth stock.
The risk level is low—the probability of major loss over a long period of time is unlikely, especially with the growth that is expected.
This stock is a disciplined investment with long-term value.
This brand is gaining popularity with Gen-Z, specifically in the running world. It's increasingly competing with larger and more historic athletic companies like Nike and Adidas.
The company's values of sustainability align with Gen-Z’s growing belief in the importance of sustainability in products.
On Running’s product is loved by its users due to their comfort and style—specifically among older Gen-Z, who show a trend of wanting to adopt new fitness trends. Those who adopted it stayed because of the quality of the product.
The company's growth rate is sustainable; however, it is currently seen as a moderate buy among Wall Street analysts due to its expected growth. It's not expected to repeat the same level of growth it had last year.
On’s business model is made up of innovation, a strong brand, and direct-to-consumer expansion. This model is efficient—particularly due to the technological developments in its product, especially with its CloudTec cushioning technology. Its direct-to-consumer expansion also allows the company to profit more by decreasing its dependency on third-party retailers.
On does have enough cash to withstand economic downturns, and it doesn’t seem to be reliant on investor optimism. Analysts have expressed their confidence in On Holding AG’s financial resilience. On also has more cash than debt, meaning it has high, robust liquidity.
On Holding AG (2024 Performance)
On Running vs Competitors (Nike & Lululemon)
Metric On Running Nike Lululemon
Revenue Growth (YoY) 2024: 32.3% 2024: 0.28% 2024: 18.60%
Gross Margin. Q3: 60.6% (highest since IPO). Q3: 44.6%. Q3: 57.5%
Price-to-Sales Ratio 6.55 2.22 8.5
On outperforms its competitors in almost all of these metrics. The revenue growth being quite high is important, as I see this company as a growth stock—and revenue growth is a big indicator of that. It also has a high price-to-sales ratio and gross margin, meaning it’s valued much higher than Nike and is extremely efficient at producing and selling its products.
On is benefiting from various broad macro trends like fitness culture, sustainability, the shift to direct-to-consumer, high-performance products, and the popularity of wearing athletic clothes casually.
The main differentiation is the technology involved—CloudTec—which is a cushioning system that gives the user a unique experience that is comfortable while also transferring the energy of your foot to the ground efficiently. This technology is very hard to replicate by competitors.
Gen-Z will most likely remain loyal to this company due to the brand’s alignment with Gen-Z values such as sustainability and its social media presence, with big influencers wearing their products. However, as with most clothing companies, there is always a risk of fashion trends changing or competitors taking their market share.
On is backed by data for the most part—specifically its revenue growth, its unique product, and the globalization of the brand. However, the stock’s value may be a little inflated due to the hype around its sustainability efforts.
The stock is most likely being traded rationally—especially with its growth prospects, strong product, and sustainability focus giving the stock long-term value. Social media platforms have and can increase the momentum of short-term shifts, but not in the long run.
On Holding AG is worth a long-term investment, especially due to its prime position in the market and its ability to carve out a nice niche for itself in the sportswear world—where they are delivering a premium product while also making it sustainable. This should make it a top choice as the world looks to become more sustainable while also wanting performance.
This stock fits into the strategy of growth investing due to the company having grown a lot in the past few years, and it shows no signs of slowing down with its focus on globalization. Its revenue growth is predicted to be high next year, and its gross margin is growing—the largest it has since last year—and with globalization, it’s expected to rise. However, there are risks, mainly coming from competitors like Hoka, Adidas, and Nike.
You should probably wait to invest in On until there is a dip, because the company’s current price may be inflated with a little bit of hype surrounding its potential for large growth in the next few years—especially with its increasing sustainability initiatives and its entry into new markets across the world.
