On Holding Stock: Can ONON Double Sales and Buy Back $1 Billion Without Breaking Its Premium Formula?

Ticker: ONON
Rating: Buy
12-Month Price Target: $38
Current reference price: approximately $30

On Holding just gave investors something much bigger than another pair of expensive running shoes.

At its September 22 investor day, the Swiss sportswear company laid out a plan that effectively asks investors to believe three things at once: On can remain one of the fastest-growing premium athletic brands in the world, it can continue expanding profitability while spending aggressively on growth, and it can return as much as $1 billion to shareholders without starving the business of the capital needed to challenge Nike and Adidas.

That is an ambitious combination.

It is also becoming increasingly difficult to dismiss.

On now expects net sales to reach at least CHF5.6 billion by 2029, accompanied by high-teens annual constant-currency growth, gross margins of at least 65%, and an adjusted EBITDA margin of 22% or better. At the same time, the board has authorized the company's first share-repurchase program, allowing On to buy back as much as $1 billion of its Class A shares through the end of 2029.

For a company that is still expanding stores, entering new sports, signing global athletes, investing in apparel and developing proprietary footwear technology, a billion-dollar buyback is more than a financial footnote.

It is a statement.

Management appears to believe On is moving from the stage where every available dollar must be reinvested into growth toward a stage where growth and meaningful shareholder returns can coexist.

The next three years will show whether that confidence is justified.

The 2029 Target Changes the Story

On's long-term target is aggressive enough to reshape the investment thesis.

The company generated CHF3.01 billion of sales in 2025. Management now expects sales of at least CHF5.6 billion by 2029, approaching $7 billion at current exchange rates. That represents something close to another doubling of the business in only a few years.

The more important number, however, may be profitability.

On isn't forecasting rapid growth at the expense of margins. Management wants adjusted EBITDA margins to rise beyond 22% by 2029 while maintaining gross margins of at least 65%.

That distinction matters enormously.

Plenty of consumer brands can grow quickly by opening stores, adding wholesale partners, spending heavily on advertising and discounting merchandise.

On is trying to accomplish nearly the opposite.

Its strategy depends on maintaining scarcity, pricing power and full-price selling while simultaneously expanding distribution.

That is considerably harder.

Yet the company's recent results provide some evidence that the strategy is working.

Second-quarter 2026 sales increased 21.6% on a constant-currency basis. Direct-to-consumer revenue increased 34.3% in constant currency, while gross margin reached 65.4%. Adjusted EBITDA increased 23.5% to CHF168.1 million and the adjusted EBITDA margin expanded to 19.8%. On also ended the quarter with approximately CHF1.21 billion of cash and cash equivalents.

Those numbers help explain why management feels comfortable discussing capital returns at this point in On's development.

The balance sheet is becoming an asset rather than merely fuel for expansion.

The $1 Billion Buyback Is More Interesting Than It Looks

Investors normally don't associate aggressive stock repurchases with rapidly expanding athletic brands.

Growth companies typically want every available dollar.

New stores need capital. Marketing needs capital. Product development needs capital. International expansion needs capital.

On apparently believes it can fund all of those activities and still have substantial cash remaining.

Its newly authorized program permits up to $1 billion of Class A share repurchases through December 2029.

Against a recent market capitalization of roughly $10 billion, that authorization is potentially significant. Yahoo Finance placed On's market value around $10.1 billion as of September 23.

If fully utilized at roughly today's valuation, the authorization would equal around 10% of the company's market capitalization.

Actual repurchases will obviously depend on share prices, cash generation and management's capital-allocation decisions, but the size of the authorization deserves attention.

There is another reason I like the announcement.

A buyback gives management flexibility.

A dividend quickly becomes something investors expect every quarter or every year. Reducing one is often interpreted as a sign of financial distress.

Repurchases can be opportunistic.

If ONON shares become expensive, management can direct capital toward expansion instead. If the stock becomes unusually cheap relative to the company's long-term earnings potential, On can retire more shares.

For a company whose value could fluctuate dramatically as investors constantly reassess its growth rate, that flexibility makes sense.

The Premium Model Is the Real Economic Moat

On sells shoes.

But investors buying ONON aren't really betting on footwear.

They're betting on pricing power.

The company's gross margin tells the story.

At 65.4% during the second quarter, On's gross profitability is extraordinary for a physical consumer-products company. Even more impressive is that the company achieved that profitability while absorbing higher U.S. tariffs and excluding potential tariff refunds.

That margin exists because On has successfully persuaded consumers that its products deserve premium prices.

Protecting that perception is probably more important than maximizing unit volume.

Management has repeatedly emphasized full-price discipline. The company has even deliberately managed wholesale inventory rather than flooding retailers with merchandise simply to generate additional near-term revenue.

I think that strategy is critical.

Premium brands usually begin getting into trouble when management discovers how easy it is to manufacture short-term growth.

Add retailers.

Increase promotions.

Discount inventory.

Expand too quickly.

Revenue jumps.

Then customers gradually learn that there is no reason to pay full