Despite a recent 34% drop from its all-time highs, On Holding (NYSE: ONON) stands out as a strong candidate for long-term growth. The Swiss athleisure brand continues to demonstrate impressive revenue growth across footwear, apparel, and accessories, even as it navigates challenges like increasing tariffs and heavy investment in global expansion. This downturn presents a potentially lucrative entry point for investors eyeing a premium brand with a loyal customer base and significant international runway.
In the dynamic world of athleisure, few brands have captured attention quite like On Holding (NYSE: ONON). Renowned for its distinctive performance footwear, On has rapidly ascended to challenge industry giants. However, despite its meteoric rise, the stock has recently experienced a significant pullback, dropping 34% from its peak. For the dedicated investor community at onlytrustedinfo.com, such a dip isn’t a red flag, but an invitation for deeper analysis into a potential long-term opportunity.
The Rise of a Premium Athleisure Icon
On Holding carved its niche by focusing on innovation, particularly with its signature CloudTec® cushioning technology, characterized by the unique hollowed pods on its soles. This design promises superior comfort and performance, captivating a loyal, affluent clientele. The success of its flagship “On Cloud” sneakers, alongside models like Cloudsurfer and Cloudmonster, has built a powerful brand identity that commands premium pricing.
The company’s financial performance reflects this strong market reception. In the second quarter of 2025, On Holding reported a robust 38% year-over-year revenue increase on a currency-neutral basis. This growth wasn’t limited to footwear, which saw a 36% rise; clothing sales surged an impressive 76%, and accessories spiked by 143%, indicating a broadening appeal across its product categories. This expansion beyond its core footwear offerings is a crucial sign of a maturing brand ecosystem, as detailed in the company’s official earnings report released by On Holding AG Investor Relations.
Strategic Global Expansion and Omnichannel Dominance
On Holding’s growth strategy is distinctly global and omnichannel. The company has successfully cultivated direct-to-consumer (DTC) sales, which soared 54% in Q2 2025, demonstrating strong brand resonance and customer preference for its exclusive channels. Simultaneously, On maintains a significant presence in wholesale markets, ensuring broad accessibility and reaching new customers in diverse regions.
Gross margins also expanded, moving from 59.9% to 61.5% in the last quarter. This indicates efficient production and pricing power. However, as a company still very much in growth mode, operating expenses remain elevated. Significant investments in marketing, administration, and establishing new regional footprints have resulted in negative net income for the second quarter. This is a common characteristic of high-growth companies prioritizing market share and brand building over immediate bottom-line profitability.
Navigating Headwinds: Tariffs and Inflation
The recent dip in On Holding’s stock price is largely attributable to macroeconomic concerns, particularly rising tariffs and persistent global inflation. The company sources a significant portion of its products from Southeast Asia, and tariffs on merchandise manufactured in Vietnam and Indonesia have reportedly increased from 20% to 40% and 39% respectively. These increased costs naturally pressure profitability, leading to investor apprehension.
Moreover, sustained global inflation poses a potential threat, even to brands with an affluent customer base like On. While premium brands often demonstrate greater resilience, an prolonged economic slowdown could eventually impact consumer spending habits across all segments. Major financial news outlets, such as Reuters, have highlighted how rising input costs and supply chain disruptions continue to challenge companies producing goods overseas, directly impacting investor sentiment towards firms like On Holding.
Management’s Optimism and Valuation Insights
Despite these challenges, On Holding’s management remains optimistic. CEO Martin Hoffmann expressed confidence in the company’s ability to navigate increasing tariffs, even raising profitability guidance. He stated that as On scales up its operations and continues to generate higher sales with its premium pricing, it can absorb more costs and still come out ahead. This outlook suggests a belief in the brand’s pricing power and the efficiency gains from increased scale.
While the market has reacted to a perceived deceleration in sales growth as the company matures, many analysts view the current valuation as attractive. On Holding currently trades at a forward one-year price-to-earnings (P/E) ratio of 26 and a price-to-sales (P/S) ratio of 4.4. For a company still early in its global expansion and demonstrating strong brand momentum, these metrics suggest the stock may be “undeservedly oversold.” The consensus among Wall Street analysts reflects this sentiment, with an average target price predicting a 64% gain over the next 12 to 18 months, with some projections as high as 90%.
The Long-Term Investor’s Perspective
For investors focused on long-term value, the 34% drop in On Holding’s stock could represent a compelling buying opportunity. The company possesses several key attributes that underpin its long-term potential:
- Strong Brand Loyalty: A dedicated customer base willing to pay premium prices for its innovative products.
- Product Diversification: Successful expansion beyond footwear into clothing and accessories, creating multiple revenue streams.
- Global Growth Runway: Significant opportunities for international expansion, especially as brand recognition continues to build worldwide.
- DTC Strength: High-margin direct-to-consumer channels are growing faster than wholesale, improving overall profitability over time.
- Innovative Edge: Continuous investment in R&D to maintain its technological advantage in performance athletic wear.
While the high operating expenses and tariff pressures are valid concerns, they are largely reflective of a company aggressively pursuing market leadership. As On Holding scales and refines its operational efficiencies, its profitability is expected to catch up with its impressive revenue growth. Investors looking for a high-growth athleisure play with a demonstrated ability to attract and retain customers globally should consider taking a closer look at On Holding shares during this period of undervaluation.
