ONON Falls 27.2% in a Month. Does the Sell-Off Create Opportunity?

On Holding AG ONON shares have fallen 27.2% in the past month, putting the stock near the low end of its three-year valuation range. The decline comes even as the company continues to post double-digit sales growth and expanding profitability.

That split matters for investors. The sell-off has reduced a once-richer valuation, but softer wholesale sell-through, higher tariffs and rising operating costs keep the near-term risk-reward from looking straightforward.

Why ONON's Wholesale Discipline Matters

Second-quarter wholesale net sales rose 12.7% at constant currency, well below direct-to-consumer growth of 34.3%. ONON deliberately restrained wholesale sell-in in a promotional multi-brand environment, particularly in the Americas, to protect channel inventory health and full-price positioning.

The choice limits near-term volume while ONON prepares a broader running-product refresh. NIKE, Inc. NKE reported fiscal 2026 fourth-quarter wholesale revenues up 4% on a reported basis. Deckers Outdoor Corporation DECK said HOKA brand sales rose 7.7% in its first quarter of fiscal 2027, underscoring continued competition in performance footwear.

ONON's Margins Still Signal Premium Brand Strength

ONON's gross margin expanded 390 basis points year over year to 65.4% in the second quarter. Adjusted earnings before interest, taxes, depreciation and amortization margin increased to 19.8% from 18.2%, helped by freight efficiencies, a higher direct-to-consumer mix, premium positioning and favorable foreign exchange, which more than offset higher U.S. import duties.

Direct-to-consumer sales reached 45.7% of quarterly revenues, up from 41.1% a year earlier. Management raised its full-year 2026 gross-margin outlook to at least 65% while maintaining adjusted earnings before interest, taxes, depreciation and amortization margin guidance of 19.5%-20%, keeping margin execution central to the investment case.

Tariffs and Rising Costs Keep Pressure on ONON

Additional Section 301 tariffs imposed by the United States in July 2026 are expected to increase duties on On Holding's products. The incremental earnings impact was not quantified, leaving uncertainty over how much of the added burden can be absorbed through sourcing, pricing and operating efficiencies.

Selling, general and administrative expenses rose 18.5% to CHF 436.3 million in the second quarter, faster than reported net-sales growth of 13.5%. Future payment commitments under signed leases increased to CHF 230.3 million from CHF 153.8 million at year-end 2025, reducing cost flexibility if demand weakens.

ONON Valuation Resets but Is Not an Obvious Bargain

ONON now trades at 14.5X forward 12-month earnings, the bottom of its three-year range of 14.5X to 86.2X and far below the 44.1X median. The month-long sell-off has therefore removed a substantial portion of the stock's historical valuation premium.

The multiple still sits above the Zacks sub-industry level of 12.7X. The Zacks Consensus Estimate for current-fiscal-year earnings has also moved 2.1% lower over the past four weeks, so a cheaper multiple does not by itself settle the valuation debate.

Image Source: Zacks Investment Research

ONON's Signals Still Argue for Caution

The sell-off has made ONON less expensive, but the near-term setup remains mixed. Growth, direct-to-consumer strength and margin expansion support the business profile, while restrained wholesale shipments, tariff uncertainty and rising costs argue against treating the price drop alone as an opportunity.

ONON currently carries a Zacks Rank #4 (Sell). Its VGM Score of A, Growth Score of A and Momentum Score of A point to favorable style characteristics, but the Value Score of D is less supportive. Because the Style Scores are designed to complement the Zacks Rank, they do not override the Rank's more cautious near-term signal.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Research Chief Names "Single Best Pick to Double"

From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.

This company targets millennial and Gen Z audiences, generating nearly $1 billion in revenue last quarter alone. A recent pullback makes now an ideal time to jump aboard. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research