The Rundown - Deep Dive: Can On Running ($ONON) Dethrone Nike?

Episode Date: November 22, 2025

On is the hottest brand in footwear right now. The company is experiencing strong growth and it's captured the attention of investors. Zaid breaks down how On built its cult following, the numbers behind its explosive growth, the bull case around innovation and the running boom, and the bear case around brutal competition, fashion risk, and a rich valuation.This video is for informational purposes only and reflects the views of the host and guest, not Public Holdings or its subsidiaries. Mentions of assets are not recommendations. Investing involves risk, including loss. Past performance does not guarantee future results. For full disclosures, visit Public.com/disclosures.

Welcome back to the rundown for another weekend deep dive. Today, we are diving into the rise of the running brand on. The Swiss sneaker company went from an unknown brand to a household name in less than a decade thanks to some strategic partnerships and incredible products. So in today's episode, we'll take a look at the origins of the company, how on shoes have built a cult-like following the bull and bear case for the company moving forward. and if they can one day dethrone the giants like Nike and Adidas. We got a great one for you today.

Let's dive in. On was founded back in the late 2000s in the Swiss Alps by a guy named Oliver Bernhard. Bernhard was a Swiss Ironman champion, so he spent a lot of his time running ridiculously long distances. He wanted shoes that felt like running on clouds. He didn't really like anything in the market at the time. So he started hacking together some prototypes, one of them being gluing a piece of garden hose to the bottom of a Nike shoe to create a softer landing. When he started running on those, the loops of the garden hose squished down to cushion the impact

and then locked firmly to push him forward. That was the light bulb moment for him, and this unique concept ultimately was the basis of OnCloud. Bernhard called this cloud tech, and what's crazy is he pitched this idea to a ton of shoe companies, including Nike who was sponsoring him at the time. They weren't interested, neither was Adidas or New Balance. Now, Puma did give it a serious consideration, but they ultimately passed, so Bernhard decided to do it on his own. He teamed it with a couple of buddies, Casper Copetti and David Alleman, and in 2010, they officially founded On in Zurich, Switzerland. Now, early on, they were a niche brand for

hardcore runners that really liked the cloud cushion at the bottom of the shoe. But there were a couple key moments for the company. The first one came in 2012. On had a shoe called the Cloud Racer and a Swiss triathlete Nicola Speary won gold at the London Olympics wearing those shoes. So that gave the company some global street credit. But the biggest moment came in 2019. That's when Onn announced a partnership with Swiss tennis legend Roger Federer. As part of this partnership, Federer would get 3% stake in the company and he was going to launch his own shoe under the On brand called the Roger. And I got to say, this really put on on the map. I'm a big tennis fan, and Roger Federer was still playing at the time.

And I remember when he announced that he was ditching Nike to go with this Swiss company. I'd never heard of him before. I was kind of shocked, but it worked out. Not just for On, but also for Roger Federer. Because fast forward today, On is a publicly traded company worth over $13 billion. So let's talk number. On Holdings, IPOed on the New York Stock Exchange back on September of 2021 at $24 a share, given the company a market cap of $6.9 billion.

Today, the stock is trading around $40 a share at the time of this recording, given the company a market cap of around $13 billion. So the company has seen their value almost double in the last few years, and there's a good reason for that because their growth numbers are very impressive. On recently reported third quarter earnings, and they sell sales of nearly 800 million Swiss franc, which is around $980 million. That represents a 25% sales growth year over year, while companies like Nike are seeing their revenues shrink.

But to me, the most impressive metric is their gross margins. That's basically how much money on keeps after accounting for the cost to actually make the shoe. On their most recently reported earnings, they saw gross margins of 65%, which is pretty high for a shoe company. For reference, Nike and Adidas usually hover around the 45% range. And what that means is that On has incredible pricing power. They're not just discounting their shoes to get you to buy them. In fact, the company recently raised prices and it still didn't hurt their sales. They've essentially turned themselves into a luxury running company. Their vision is to become the most premium

global sportswear brand and it's working so far. They're now expecting 2025 sales to reach nearly billion Swiss franc, which would represent a sales growth of 34% in 2025 compared to 2024. And the big part of this growth story is their global presence. Now, geographically, the Americas are still their biggest market, but their fastest growing market is in Asia Pacific. In Q3, sales in Asia Pacific were up 94% year over year. And in the first quarter of 2025, China alone saw sales up 130%. Today, Asia Pacific represents around 20% of the company's total sales.

up from just the 5% it was in 2020. So it's just another example of how the company is seeing rapid growth all over the world. Now, keep in mind, 92% of On's revenue are from footwear. And just to put that in perspective, if you look at Nike, footwear accounts for about 67% of their revenue. So the apparel business could be a big growth area for On. In fact, their apparel revenues saw a 90% jump year over year in Q3. So that's just one of many bullcases for the company moving forward.

So let's get it. into that. Let's talk about why people are so fired up about this stock. Right now, the stock has a consensus buy rating from Wall Street with an average price target of $61.50. The bullcase for On comes down to a few things. There's products, their strategy, their brand, and their current market share. This might come as a surprise because On seems to be everywhere right now, but they've only captured about 3% of the global sports footwear market versus about 40% for Nike and 18% for Adidas. So even after all this hype, On is very small when it comes to market share. Now, the share has increased more than 8x from 2019 to 2024, which is very impressive, but they

have a lot more room for growth. On is starting to expand into multiple categories. You know, they started off as a pure running brand, but now they're in tennis, training, and apparel. And apparel was actually turning into a real growth engine. On sells $450 puffer jackets and $150 t-shirts. And that strategy is working because apparel sales exploded by nearly 87% this past quarter. And right now, apparel only accounts for about 6% of On's total revenue. For Nike and Adidas, apparel is around 25% of the revenue. So that's a massive gap that On can fill.

And management says these apparel shoppers are more loyal and they spend more money per trip. Now, the other tailwind for On is the running boom that's happening right now. Running has now become much more than just a way for people to get some cardio in. It's become a full-on social and cultural phenomenon. Thousands of people are joining run clubs to meet new people. The number of new run clubs has tripled compared to last year at this time, according to the popular exercise tracking app Strava. People are joining run clubs to stay in shape, but also make new friends and maybe even find

a dating partner. So it's easy to see why some are willing to drop $200 on good-looking and high-performing running shoes. In the past three years, the U.S. running shoe market has surged by 20% to $7.4 billion as of October. This is according to the market researcher Sarkana. Another example of the running boom is participants in marathons. Just a few weeks ago, 59,000 people ran in the New York City Marathon, the most runners in any recorded marathon in history. It's up 6% from 2024.

On top of that, the woman winner of the New York City Marathon was Helen Obrini. she set a new course record and she was wearing a pair of ons. But I think what makes investors most excited about Onn is the innovation, especially in manufacturing. On recently introduced something called Light Spray. It's a new manufacturing technology that can make laceless, futuristic running shoes using a spray gun in about three minutes. So that allows On to automate the process of producing the upper material of the shoe. Light Spray was actually used in the shoe won by the Marathon Champ. and On plans to bring this to everyday runners with the lightspray cloud monster hyper

sometime in spring or summer of 2026. I mean, if they can scale this from a few thousand pairs to millions of shoes, that's a potential game-changing technology for both costs and speed. It means faster production, fewer hands, and potentially better margins for the company. So the bull case for On here is the huge runway they have in market share, a growing apparel category, the running boom that's happening right now, and a strong innovation pipeline that could boost both demand and margins. But the incumbents in this space like Nike have taken notice of OnSuccess and they're ready to compete.

So we've talked about all the reasons that people love this stock. Now let's talk about the downsides. A big part of On Success over the past few years has been capitalizing on some major mistakes made by Nike. Nike spent the past few years doing two things that helped on. One, they pulled back from wholesalers like Foot Locker and Dick's sporting goods to juice their margins with a direct-to-consumer strategy. That allowed On and other upstarts like Hoka to come in and build relationships with these retailers, including specialty stores that cater to serious runners and fill the empty shelves abandoned by Nike. The other mistake that Nike and Adidas made for that matter is focusing too much on fashion at the expense of performance.

Nike stopped catering to these serious athletes and instead catered more to the fashion crowd. Those mistakes by Nike caused their sales to drop and their stock to lose more than half of its value since the pandemic era high. But the thing is, Nike knows they screwed up. In fact, they fired the CEO who made those mistakes and brought in the new CEO, Elliot Hill, who has renewed the company's focus on wholesale relationships and sports, including running. So that could be a problem for on. Nike might be in a slump right now, but they're still one of the most recognizable brands in the world. and they're doing over $50 billion in annual sales compared to On, which is just doing $3 billion. So Nike has more money, more athletes, and more marketing muscle to stage a comeback.

If Nike repairs their relationship with wholesalers and reclaim significant shelf space again, that could come at the expense of On. Nike's already started to make some moves in that department. They're starting to sell their shoes on Amazon again. And the thing is, we've seen this movie before with Nike. About a decade ago, many thought that Under Armour would pose a serious threat to Nike when they signed athletes like Steph Curry and Tom Brady and even celebrities like The Rock. Well, it didn't work out.

Under Armour was hot for a minute, but now not so much. In fact, Steph Curry just left them and their stock is down around 90% from its peak back in 2015. So that's a big concern for On. They're also really hot right now. They've signed major athletes like Roger Federer and celebrities like Zendaya. But how do they make sure they don't end up like Under Armour? The fashion risk is real. Sneaker culture is ruthless and constantly changing.

Are the cloud shoes going to be cool in three to five years? And while On sees their apparel business as a growth lever, that's also an extremely competitive space. And it's not just dominated by Nike. You have other trendy brands like Allo, Viori, and even Lulu Lemon. And finally, there's the economic risk. If there is an economic slowdown, it might be hard to justify dropping $200 for running shoes, and instead runners might go for the $120 shoes from Nike.

Now, looking at valuation, On it currently trades at a forward PE ratio of around $20. And that's what the broader apparel industry trades out as well. So the stock isn't very expensive yet, but they need to keep putting up 30% growth numbers to justify their valuation. If they have one bump in the road or a changing fashion trend, that could cause investors to reconsider their valuation. So what's my take here? Well, On has undeniably done an incredible job capturing the high-end runner market.

Their shoes have a cult-like following in the running community. But now they're trying to move beyond just running into other categories and general lifestyle. But they're operating in a very competitive space with incumbents like Nike. And that's what makes me nervous about On long term. Now, I don't think they'll become like Under Armour because their shoes are loved by runners. So I think they'll always have that as a core customer base. But beyond, it might be hard to sustain the level of growth if they ever stop being the hot brand. So if you think that On can keep putting up 30 plus percent growth numbers with 65% margins,

then on could be an attractive investment. But if you think that Nike and others will catch up and that On's popularity is just a fad, well, then it gets harder to justify the valuation. Regardless, the On's story and product is very impressive. Everyone that has them loves them. And while I'm not a runner myself and I spend 80% of my time sitting in front of her screen, I think I'm going to get myself a pair of On shoes pretty soon. Well, all right, guys, that's it for today's weekend, deep dive.

Let us know in the comments on Spotify and YouTube if you're a fan of On. and if you're bullish or bearish on the company. And let us know what companies you want us to cover in future deep dive episodes. Thank you guys again for listening, watching, and commenting. Shout out to Mike and Connor for all the work behind the scenes. And we'll see you guys back here tomorrow. Rosen lasagna, medium power, 15 minutes. Sounds like Ojo time. Let's play.

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