Goldman Sachs downgrades ON on competition risks

Investing.com -- Goldman Sachs downgraded On Holding AG (NYSE: ONON) to "Neutral" from "Buy" on a more competitive landscape and limited near-term upside despite strong brand momentum.

“On’s competitors are increasingly focusing on winning back market share in running, potentially leading to a more competitive backdrop going forward,” analyst at Goldman Sachs said.

The firm maintained price target at $57 but noted that with shares already up 227% since November 2022, the potential for further gains is now modest compared to peers.

Goldman expects ON to deliver a 22% compound annual sales growth rate from 2024 to 2028, with EBIT margins expanding by 360 basis points to 12.3%, driven by direct-to-consumer (DTC) sales growth of 28% annually. However, recent U.S. credit card data suggests fourth-quarter DTC growth may trail consensus estimates, though the firm does not anticipate a broader earnings miss.

Additionally, Goldman flagged growing competition in the running shoe market, with brands like Nike (NYSE: NKE) increasing their focus on reclaiming market share. While ON remains a leader in consumer preference for comfort, the firm sees a more challenging backdrop ahead.

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