On Holding: Strong Operating Results, but Valuation and Execution Risks Keep Us on the Sidelines

What happened

On Holding reported record FY2025 revenue of CHF 3.0B and gross margin of 62.8%, beating prior year, but the stock has fallen ~19% year-to-date due to FX losses, CEO transition, and a softer 2026 outlook. The Seeking Alpha article argues the sell-off is overdone, citing a 13x EV/forward EBITDA valuation and a scenario-based fair value in the high $40s. However, our analysis shows that the gross margin improvement was primarily driven by freight efficiencies and FX, not pricing power, and operating expenses are rising as DTC expands. The upcoming leadership transition on May 1, 2026 adds uncertainty, and promotional intensity in wholesale channels threatens full-price execution. At $35.5, the stock's 45.4x P/E and 18.3x EV/EBITDA leave no room for error, justifying our WAIT rating until FY26 guideposts are proven.

Implication

For investors already long, the risk-reward is balanced; a trim above $42 or on any confirmed margin miss is prudent given the multiple. New longs should enter only near $32 or stronger evidence that FY26 margin targets (≥63% gross, ≥18.5% EBITDA) are intact. The bullish case from the article rests on an assumption that recent promotion activity is isolated, but early warnings (up to 40% off deals, wholesale promo intensity) suggest otherwise. If On delivers on its guide, the stock could re-rate toward $38–$45, but the path is narrow given fixed-cost expansion and seasonality. Long-term investors can accumulate on deeper weakness, but only after confirming brand discipline holds during the leadership transition.

Thesis delta

The Seeking Alpha article presents a more optimistic view, arguing that the recent decline creates a buying opportunity at an attractive EBITDA multiple. Our DeepValue report maintains a cautious stance, emphasizing that the valuation at 18.3x EV/EBITDA prices in flawless execution, while key risks (promotion, opex creep, FX) are underappreciated. The shift is from 'value vs. risk' to 'wait for confirmation' – the stock is mispriced only if the company delivers on its FY26 guide; until then, patience is warranted.