On Holding AG (NYSE:ONON) shares are bouncing back after Raymond James downgraded the stock on Tuesday, but the stock is still down approximately 2.5% for the week.
What To Know: Yesterday, Raymond James analyst Rick Patel downgraded On Holding from Strong Buy to Outperform this week, citing updated foreign exchange and tariff assumptions.
Patel believes the Swiss footwear company, backed by tennis great Roger Federer, will face near-term headwinds due to a strengthening of the Swiss Franc, tariffs and slower wholesale growth.
Approximately 90% of On Holding’s footwear is sourced from Vietnam, with the rest primarily coming from Indonesia and Turkey. The Raymond James analyst expects new annual tariffs to be a 300 basis point headwind, versus previous expectations of 150 basis points. Still, the analyst sees the company as better positioned than most competitors to raise prices and remains optimistic on the company longer term.
Patel also expects foreign exchange headwinds to act as a negative 5.5% headwind to 2025 revenue growth versus prior estimates of negative 3.5%. Although a stronger Swiss Franc will help gross margins, the analyst expects the currency strength to weigh on operating income.
Wholesale comparisons will also be more challenging this quarter due to the timing of product launches, Patel said.
The Raymond James analyst is bullish on the company’s long-term story as he expects underlying demand and growth to show continued strength in 2025 and beyond. Patel highlighted channel checks showing a modest acceleration in Google searches and strong web traffic compared to the prior quarter.
“Net, while 2Q results could be bumpy due to macro factors, we remain bullish on ONON,” the analyst said.
Patel expects On Holding to outperform over the next year. The analyst has a 12-month price target of $66 on shares of the footwear maker.
On Holding is estimated to report second-quarter financial results around Aug. 19.
ONON Price Action: On Holding shares fell over 5% on Tuesday following the downgrade. The stock was up 1.31% Wednesday at $51.02 at the time of publication, according to Benzinga Pro.
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