On Holding's Cloud Nine: Can Innovation Lift Profits 560% by 2028?

Investors often ask, Can a Swiss sneaker startup sustain its meteoric rise? On Holding AG (ON:SW) has turned heads with its CloudTec technology and a relentless focus on premium athletic wear. But with Wall Street whispering about a 560% profit surge by 2028, the question is: Is this ambition grounded in reality—or a flight of fancy? Let's dissect the risks, rewards, and whether this stock belongs in your portfolio.

The Innovation Engine: CloudTec, LightSpray, and More

On Holding's secret sauce is its proprietary technology. The CloudTec midsole, launched in 2009, pioneered a soft, responsive running experience that's since become iconic. Now, the company is doubling down with LightSpray, a 3D-printed midsole technology that promises lighter, more customizable footwear. This isn't just R&D jargon—it's a direct response to competitors like Nike's React and Adidas' Boost, which dominate the market.

But On isn't just innovating in materials. Its direct-to-consumer (DTC) strategy is a masterclass in brand control. With DTC sales now accounting for 38% of revenue, On is replicating the success of Lululemon and Allbirds by owning the customer relationship. Its stores and app-driven customization tools (like the “Cloud Maker” configurator) build loyalty in an era where personalization is king.

The Growth Machine: Partnerships and Global Expansion

On's athlete partnerships are another ace up its sleeve. Sponsors of athletes like Zendaya (the face of its Cloudsurfer line) and Roger Federer (via the “The Roger” collection), On blends star power with niche appeal. This strategy targets affluent buyers in regions like Asia-Pacific, where sales soared 130% in Q1 2025.

Geographically, On is on fire. The Americas and EMEA regions are growing steadily, but Asia-Pacific's 95.6% constant-currency sales growth in 2024 (Q4's 62.1% gross margin) hints at untapped potential. As emerging markets embrace premium athletic wear, On's Swiss-made cachet could be a goldmine—if it avoids the landmines.

The Risks: Dependency, Saturation, and Supply Chains

But let's not get carried away. On's license dependency is a red flag. The “The Roger” line, tied to Federer's legacy, accounted for 20% of 2023 sales. If that partnership sours or demand wanes, On's top line could crater.

Then there's the market saturation threat. The athletic apparel sector is crowded, and On's rapid growth (43% sales jumps in Q1 2025) may not last. Competitors are copying its DTC playbook, while price-sensitive buyers might turn to cheaper rivals during a recession.

Supply chain woes also linger. In Q1 2025, On cited currency fluctuations and trade policy risks as headwinds. A stronger Swiss franc eats into profits, and geopolitical tensions (e.g., China's dominance in critical minerals) could disrupt its expansion.

The 560% Profit Target: Pie in the Sky or Pay Dirt?

Analysts project a 560% profit jump by 2028, extrapolating from On's current trajectory. But let's crunch the numbers. In 2023, net income was CHF79.6 million. To hit 560% growth, 2028 profits would need to hit CHF560 million—a 20% compound annual growth rate (CAGR) from 023 levels.

Is this feasible? On's Q1 2025 net income dropped 38% year-over-year due to forex headwinds, but adjusted EBITDA rose 55% to CHF119.9 million. Management's 2025 sales guidance of 28% growth (vs. 2024's 29%) suggests tempered expectations.

The wildcard is LightSpray's scalability. If this tech can cut costs and boost margins (Q1 gross margin was 59.9%, up from 59.7% in 2023), On could hit targets. But execution is key—supply chain hiccups or a misstep in its U.S.-focused expansion (where sales rose 32.7% in Q1) could derail progress.

Investment Thesis: Buy the Innovation, Hedge the Risks

Here's the bottom line: On Holding is the Apple of athletic wear—innovative, brand-obsessed, and hungry for global dominance. Its DTC playbook, tech edge, and Asia-Pacific momentum give it legs. However, investors must stay wary of its reliance on licenses and geopolitical risks.

Buy if:
- LightSpray launches successfully in 2025, boosting margins.
- The U.S. and Asia-Pacific markets keep growing at 30%+ rates.
- The company reduces forex exposure via hedging or local manufacturing.

Sell if:
- The “The Roger” line underperforms, or supply chain delays persist.
- Competitors (e.g., Nike's “You Can't Stop Us” innovation) close the tech gap.
- Recessionary pressures hit discretionary spending.

Historically, a simple buy-and-hold strategy around earnings announcements has shown promise. From 2020 to 2025, buying On Holding's stock on earnings announcement dates and holding for 30 days yielded an average return of 145.84%, outperforming the benchmark by 37.20%. While the strategy's compound annual growth rate of 17.85% suggests growth potential, investors should note its maximum drawdown of 44.45%, emphasizing the need for risk management.

Final Verdict: A Risky Ride Worth Taking?

On Holding is a high-beta play—perfect for investors willing to bet on tech-driven disruption. Its 560% profit target is ambitious but not impossible if execution stays sharp. For now, I'm bullish but cautious: own the stock, but keep a close eye on LightSpray's rollout and forex costs. This isn't a “set it and forget it” investment—it's a high-wire act.

Action Item:
- Buy if you're bullish on premium athletic wear and On's DTC model.
- Avoid if you're risk-averse or prefer stable cash flows.
- Hedge with puts if you're long the stock.

Stay tuned to earnings calls for updates on LightSpray's progress and supply chain wins. This Swiss star could keep ascending—or it might come crashing back to Earth.

Disclosure: The analysis is for informational purposes only and should not be taken as investment advice. Always consult a financial advisor before making investment decisions.