Investing.com -- Raymond James downgraded On Holding to Outperform from Strong Buy and cut its price target to $38 from $52 after the Swiss sportswear maker reported weaker-than-expected second-quarter revenue and lowered its growth outlook. The brokerage said pressure in North American wholesale and limited visibility into the pace and durability of future growth had reduced confidence in near-term upside.
The $38 price target implies about 23% upside from On Holding's Aug. 11 closing price of $30.91.
On Holding's second-quarter revenue rose 13.5%, below Raymond James' 19% estimate and the Street's 18% forecast. Excluding currency effects, growth was 21.6%, also below the brokerage's 23% estimate. The weakness was concentrated in U.S. wholesale, where softer sell-through of everyday running products prompted the company to pull back sales to distributors to protect full-price selling.
Wholesale sales grew just 5%, compared with 15% expected by both Raymond James and analysts, while direct-to-consumer sales rose 26% and beat expectations. The brokerage said strong DTC performance, including higher e-commerce sales and full-price selling, should continue into the second half, but noted that DTC generates roughly twice the revenue per unit of wholesale, suggesting the revised outlook reflects lower unit volumes reaching the market.
Raymond James said competition in North America's athletic footwear market has intensified, citing Nike's recovery, continued gains by Hoka and rising competition from brands such as Salomon. It expects the current promotional environment to prove temporary, while new product launches could support stronger growth late in 2026 and into 2027.
The company lowered its 2026 ex-currency growth outlook to the low-20% range from more than 23%, while maintaining reported revenue growth guidance of 15% to 18%. It also raised its gross-margin outlook to above 65% from above 64.5% and maintained its adjusted EBITDA margin target at 19.5% to 20%.
Raymond James lowered its 2026 and 2027 revenue growth estimates to 17% and 19%, respectively, from 19% and 21%. Despite the near-term concerns, the brokerage retained a bullish long-term view, citing On Holding's brand expansion, direct-to-consumer growth, international distribution, product diversification and innovation pipeline. It expects adjusted EBITDA to grow about 21% in 2027.
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