On Holding AG

▲ Bull Case

• ◆Premium gross margin flywheel is intact and accelerating: Q3 2025 (65.7%) and Q1 2026 (64.2%) gross margins exceed FY2026 guidance floor of ≥64.5%, proving tariff offsets (7% US price increases, DTC mix gains, vendor negotiations) are more than covering Vietnam duty headwinds. Path to 66%+ margins and 20%+ EBIT margin unobstructed.
• ◆APAC is 2–3 years into a 10-year opportunity: Global brand awareness below 30%; APAC growing +96% from only 17% of sales. DTC-first China strategy preserves margins while scaling. Following S-curve trajectory of Hoka, LULU, NB. Bull case: APAC reaches 25% of revenue by FY2028 (CHF 1.9B vs. CHF 511M today).
• ◆Compounding FCF inflection in FY2027–FY2028: FCF margin expands from 9.5% (FY2025) to 13–15% by FY2028 as SG&A levers and EBIT margin surpasses 18%. At 330M shares and CHF 3.52 FCF/share by FY2030 (base case), implied FCF yield on $40 price is ~7.5% in 4 years — classic compounding setup.

▼ Bear Case

• ◆Tariff + FX double headwind is structural, not transitory: 20% US-Vietnam tariff on ~53% of revenue combined with CHF appreciation (-8pp on reported growth in Q1 2026) creates 2–3 year window where reported growth looks 12–16% vs. 22–25% CC. If consumers resist 7% US price increase, Americas volumes slow and gross margin reverts to 62–63% — stock would trade $28–32.
• ◆Founder co-CEO transition is execution risk with no historical precedent: Maurer and Hoffmann built operational infrastructure over 10+ years. Allemann and Coppetti are brand/product visionaries, not traditionally operational. Any inventory mismanagement, retail economics disappointment, or guidance withdrawal in first 12–18 months will be penalized disproportionately by market perceiving elevated governance risk.
• ◆Valuation premium requires sustained execution over 3–5 years with no error margin: Even at $40 (35% below peak), ONON trades at 43x forward GAAP earnings. If any thesis pillar fails — APAC decelerates to 20%, gross margin stalls at 63%, or SG&A does not lever — stock could retest $31.41 low or worse. Risk/reward asymmetric only for investors believing bull case has >35% probability.

“The central debate is whether On Holding can sustain and expand premium positioning (gross margins >62%, 20%+ CC revenue growth) as it scales past $5–6B revenue over next 3 years. Bulls point to evidence already in: 7% US price increase in Q1 2026 drove +22.9% CC revenue growth without volume loss; APAC growing at triple digits with margin-protecting DTC-first strategy; 22x EV/EBITDA multiple (vs. 40x peak) is attractive buying opportunity. Bears counter that company has never weathered consumer slowdown; premium brands are aspirational purchases vulnerable to demand elasticity; tariff pass-through will face headwinds in 2026–2027; founder transition removes execution certainty that supported premium multiples. Q2 2026 earnings (August 2026) — gross margin vs. 64.5% guidance — is single most important resolution point.”

• ◆Q2 2026 earnings (August 2026): Gross margin vs. ≥64.5% guidance and APAC growth rate — single most important catalyst to confirm bull thesis
• ◆FY2026 full-year guidance raise (possible Q2 2026): If Q2 actuals beat, management may raise guidance from 'CHF ≥3.44B' to higher range — multiple re-rating catalyst
• ◆CHF/USD reversal: If CHF weakens toward 0.85, reported revenue growth accelerates +5–8pp mechanically without operational change
• ◆APAC FY2026 growth confirmation: If APAC grows 50–60% in FY2026 (above 40% base case), S-curve thesis confirmed for multi-year re-rating
• ◆Apparel mix reaching 8–10% of revenue: Margin-accretive and signals brand extension success
• ◆US-Vietnam tariff reduction: Any trade deal reducing 20% tariff is direct gross margin tailwind (not in base case but possible positive surprise)
• ◆CFO appointment announcement: New institutional CFO would reduce governance discount and confidence in transition

• ◆US tariff pass-through failure (20–25% probability): If consumers resist 7% US price increase, Americas volumes slow, gross margin reverts to 62–63%, stock trades $28–32. Monitor Q2/Q3 2026 Americas volume trends.
• ◆APAC deceleration (20–25% probability): If APAC growth decelerates to 20% CAGR vs. expected 35–40%, eliminates optionality justifying premium multiple. Monitor FY2026 APAC annual disclosure.
• ◆CHF/USD structural appreciation (30–40% probability): Creates 2–3 year window where reported revenue growth 12–16% vs. 22–25% CC. Monitor CHF/USD rate vs. historical average.
• ◆Founder co-CEO transition execution stumble (15–20% probability): Any inventory mismanagement, retail economics disappointment, or guidance withdrawal in first 12–18 months penalized by elevated governance risk perception. Monitor guidance and operational trends.
• ◆China geopolitical/brand nationalism risk (10–15% probability): If China consumer rejects On brand, eliminates APAC optionality for 5–7 years. Monitor China-specific brand news.
• ◆Premium consumer spending slowdown (15–20% probability): US recession would reduce demand for $200 ASP aspirational shoes. Monitor US consumer confidence and peer volumes.
• ◆CloudTec® technology disruption (5–10% probability): If competitors launch comparable technology at lower price, counter-positioning moat collapses and ROIC spread narrows sharply. Monitor competitor product launches.