Bank of America Corp. (BofA) lowered its price target on On Holding due to concerns about Nike’s recovery and higher risks as the Swiss brand is likely to enter team sports categories to drive its next phase of growth.

BofA analyst Thierry Cota cut his price target to $62 from $73 previously but maintained his “Buy” rating on the shares.

Shares of On closed Thursday, October 16, at $41.97, up $0.53, in over-the-counter trading in the U.S. Thursday. The stock started the year at $54.77.

In a note, Cota said that a medium-term concern for On is the “rising competitive risk from the increasingly visible turnaround of Nike.”

The analyst noted that Nike’s results for the fiscal first quarter ended August 31 showed “early success” in the Nike’s new management team’s initial focus on North America, running and wholesale. As reported, Nike saw running sales jump over 20 percent in the quarter, North America revenues gained 4 percent (versus an 8 percent decline in the fourth quarter), and wholesale revenues climbed 5 percent (versus a 6 percent Q4 decline).

Cota noted that On appears exposed to Nike’s progress, as over half of its sales are in North America, over 80 percent are in the running category, and an estimated two-thirds of the Americas’ revenues were generated in wholesale in the first half.

He believes America’s slower growth will be a key focus for investors, and Nike’s improving trends add to those concerns. Cota wrote in the note, “As we will not know the strength of Nike’s upcycle for several months, the uncertainty is high.”

He also noted that it’s “frequent for the market to price a worst-case situation.”

Cota remains skeptical that Nike will ultimately reduce On’s growth. He noted Nike’s turnaround remains uncertain and questioned whether the recovery will be strong enough to disrupt peer brands. He said a return to double-digit growth for Nike “would be destabilizing for peers,” but noted that BofA estimates Nike returning to growth at a 7 percent pace in both FY27 and FY28. Cota wrote, “For now, BofA’s single-digit forecast for Nike’s turnaround can help to pull out the sector from its current downcycle, without putting at risk the peers’ growth potential, in our view.”

In the longer term, Cota expects On’s current strategy, focused on expanding across channels and geographies with “only gradual product diversification,” will help On reach close to CHF(Swiss franc)4 billion in sales next year, but to reach CHF10 billion, BofA expects that in a decade, it would likely require a bigger focus on product diversification. Cota wrote, “And if this entails a development in team sports (slower growth than running and strong positions of Adidas and Nike), possibly to be presented at a CMD [Capital Markets Day] next year with an unveiling of medium-term targets, the risk perception on the stock is likely to rise.”

In the short term, Cota said investors will be concerned about the “inevitable” slowdown in growth following the 40 percent average pace seen in the last three quarters, with particular focus on the Americas, its largest region, and the one seeing the slowest growth.

On the positive side, Cota sees On’s growth “slowing but still strong” in the third quarter, estimated to be up 32 percent from gains of 39 percent in the half and 38 percent in the second quarter. Cota expects 21.5 percent growth in the key Americas region, which he said is similar to the rate in the second quarter, excluding the impact of supply chain disruption in the year-ago second quarter. He sees “slowing but still rapid’ currency-neutral growth in Europe, up 27 percent, and APAC, up 95 percent.

He expects EPS of CHF$0.22, below the CHF$0.25 consensus estimate from Visible Alpha but above the CHF$0.16 reported in the 2024 September quarter. Cota expects gross margins to improve 70 basis points in the quarter, but at a lower rate in the first half due to the impact of U.S. tariffs.

Cota reiterated his “Buy” rating on On, citing its potential to continue gaining share. The analyst wrote, “We expect its superior growth to be fueled by strong brand heat momentum and product diversification opportunities. We believe its premium valuation is justified given a higher growth/profitability profile vs industry.”

Image courtesy On