Harley-Davidson Hogging All The Market Share It Can

Despite pricing pressures and weak third-quarter results, Argus upgraded Harley-Davidson Inc HOG from Hold to Buy with a price target of $53.

The research firm said the company is gaining market share and strengthening its product mix. The company continues to reduce older motorcycle inventory and it is planning to launch 100 new models by 2027. Argus expects new models are going to attract a wide range of new customers. The company would like to broaden its customer base and appeal to women, minorities and younger Gen X and millennial clients.

The stock is trading below its multiples (historical and the industry average price to earnings, price to sales and price to book), but Argus sees the potential for a higher valuation. Its price target of $53, together with its dividend, indicates a potential return of 13 percent.

Harley-Davidson reported Thursday Q3 EPS of 40 cents, which is significantly lower from the Q3 2016 when it reported EPS of 64 cents. It was also below Argus' estimate of 48 cents. Harley-Davidson motorcycle unit sales fell 6.9 percent worldwide, 8.1 percent in the U.S., 3.3 percent in Canada, 11.5 percent in Latin America, 6.7 percent in the Asia Pacific region and 1.4 percent in EMEA.

The company decided to open new 35 new international dealerships in an attempt to boost sales. It has managed to make market gains in both cruiser category and 601cc+ segment. Harley-Davidson is going to continue to face pressures from weak industry pricing and also from high production costs due to the introduction of new models. The research company lowered its 2017 diluted EPS estimate from $3.49 to $3.41.

Related Link: Harley-Davidson Not Ready For Slaughter After Q3 Report