William Blair analyst Dylan Carden reiterated a Market Perform rating on On Holding AG (NYSE: ONON).

The analyst comments "We downgraded On Holding shares in early August (price then $31.18) coming off an objectively underwhelming second-quarter print. Our primary hang-up was lack of visibility in the wholesale channel. A month and a half later, the company held a comprehensive and objectively bullish analyst event, during which it made a strong case for how innovation-led product can keep driving outsized growth. Stuck between these two points is a stock that we believe holds real risk from sustained wholesale channel weakness due to factors largely outside management’s control, and an investor universe that seems incrementally positive around longer-term prospects. As such, now that we are no longer jetlagged and within some distance from the palpable energy of the analyst event, in this report we felt it was timely to test our resolve and lay out the conversations we have had with investors.

We are maintaining our Market Perform rating. On shares are valued at 18.5 times our initial 2027 IFRS EPS estimate, which assumes a relatively quick rebound in the wholesale channel as new product flows in through the front half of next year. Valuation gets compelling rolling over 2028 at sub-15 times our initial estimates, though near-term downward revision risk must be traversed first. Beyond the more immediate, in the next three years On faces a critical juncture on its way to becoming a $7 billion brand with wider mass appeal. With a clear identity as a premium brand, this can potentially be a hard transition. This includes planned expansion of wholesale doors, where the company is looking to ultimately be in 75% of Dick’s, Foot Locker, and JD Sports locations, which screens more mass than premium, and creates potential volatility like the second quarter. We think between the transition to a wider audience, a challenging consumer backdrop, and historical investor skepticism even around good numbers, shares are likely to remain range-bound until some of these debates are more firmly decided."

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Shares of On Holding AG closed at $29.96 yesterday.