Raymond James cuts On Holding target on wholesale weakness

Raymond James has lowered its rating on On Holding from Strong Buy to Outperform, reducing its price target to $38 from $52. The brokerage cited weaker-than-expected Q2 revenue and a more cautious growth outlook for the Swiss sportswear maker. The $38 target suggests a potential 23% upside from On Holding's August closing price of $30.91.

Revenue for Q2 grew by 13.5%, falling short of the 19% estimate from Raymond James and the $18% forecast by analysts. Excluding currency effects, growth was 21.6%, also below the 23% estimate from Raymond James. The slowdown was mainly due to reduced wholesale sales in the U.S., where weaker sales of everyday running products led to a pullback in sales to distributors.

Wholesale sales grew by just 5%, while direct-to-consumer sales increased by 26%, beating expectations. Despite the near-term challenges, Raymond James maintains a bullish long-term outlook for On Holding, highlighting the company's brand expansion, direct-to-consumer growth, international distribution, product diversification, and innovative pipeline. The brokerage expects adjusted EBITDA to grow by about 21% in 2027.