Raymond James has reallocated ratings across the sportswear and softlines space ahead of companies reporting first-quarter results, moving On Holding up the board while trimming its stance on Deckers.
Analyst Rick Patel elevated On Holding from Outperform to Strong Buy, citing recent weakness in the stock as creating a more attractive entry point while maintaining that the companys growth trajectory remains intact. Patels note indicates that, after adjusting for stock-based compensation, Ons shares trade at roughly 10 times enterprise value to EBITDA on his estimates. The firm also assigned a $52 price target to On, a level that corresponds to about 15.5 times EV/EBITDA under Raymond James modeling and is supported by an expected 22% EBITDA increase in 2027.
At the same time, Raymond James lowered its rating on Deckers to Outperform from Strong Buy. The move is not framed as a negative call on the company's operating performance; the firm still expects Deckers to outpace consensus on fourth-quarter revenue and margins. Raymond James projects fiscal year 2027 earnings per share of $7.40 for Deckers, slightly above the Street consensus of $7.30.
Patels sector commentary emphasized a push-and-pull dynamic for consumer demand. On one hand, tax refunds processed through early April totaled $241 billion, a 14.5% increase year-over-year, which the firm views as a support for discretionary spending. On the other hand, average gasoline prices of $4.04 per gallon, up 34% year-over-year, represent roughly $3.7 billion of weekly wallet pressure for consumers.
Raymond James also discussed tariff assumptions used by companies when modeling costs. Many firms are using tariff rates of 15% or higher in their scenarios even though current effective rates are closer to 10%, the firm notes. That difference could provide some gross margin relief if the lower actual rate persists. Raymond James identified Deckers, FIGS and Nike as among the names positioned to benefit from such dynamics.
Summary
- Raymond James upgraded On Holding to Strong Buy and set a $52 price target.
- Deckers was downgraded to Outperform from Strong Buy but is still expected to beat on revenue and margins and to post FY2027 EPS of $7.40.
- The firm highlighted tax refund strength and higher gasoline costs as opposing forces for consumer spending, and noted tariff modeling differences that could affect gross margins.
Key points
- Valuation and expected EBITDA growth underpin the upgrade of On Holding - impacts the athletic apparel and footwear segment.
- Deckers remains expected to deliver solid fundamentals despite the rating change - relevant to premium footwear and softlines investors.
- Macro drivers - tax refunds and gasoline prices - are influencing discretionary spending across the retail and consumer discretionary sectors.
Risks and uncertainties
- Higher gasoline prices pose a tangible drag on consumer wallets and could weigh on discretionary categories in retail.
- Tariff rate assumptions remain uncertain; firms modeling higher tariff levels may see margin dynamics shift if actual rates differ from expectations.