What’s New With Harley-Davidson Stock?

Harley-Davidson (NYSE:HOG) stock has underperformed this year, declining by about 9% since early January. This compares to the S&P 500 which remains up by about 8% over the same period.  Now, Harley’s business picked up a bit over the last quarter. Q4 2022 results came in ahead of estimates as production levels rebounded from the company’s production shutdown in early 2022, with the semiconductor and supply chain issues easing. However, investors have been increasingly concerned that rising interest rates and the crisis in the banking industry could impact demand for the company’s iconic motorcycles in the near term. Separately, the recent resignation of the company’s chief financial officer also appears to have impacted the stock, although we believe the reaction may be overdone.

We think Harley Davidson stock looks like an attractive bet at current levels of about $37 per share.  Although there could be some near-term headwinds for the auto industry, the risk-to-reward ratio for HOG looks positive, with the stock trading at just about 8x forward earnings. The company also has room to grow earnings, given that it has projected full-year automotive revenue growth of 4% to 7% with operating income margins projected as much as 14.6% (a 70 bps increase versus last year). The company’s “Hardwire” strategic plan is also promising.  Under this plan, the company has prioritized growing its earnings per share by low double-digits through 2025, by focusing on higher-margin motorcycles (including Touring bikes, large Cruiser, and Trike) and more profitable geographic areas. We value HOG stock at about $49 per share, about 30%  ahead of the current market price. See our analysis on Harley- Davidson Valuation: Expensive or Cheap for more details. Also, check out our analysis of Harley-Davidson Revenue for more information on the company’s key revenue streams and how they are trending.

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[1] Month-to-date and year-to-date as of 4/21/2023
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