A Harley Davidson Bull Vs. Bear Debate Following Strong Q1 Earnings

Harley-Davidson Inc HOG has lagged the market in the last few years, but the company is undergoing a strategy shift centered on international markets, electrification and shipment growth.

BofA Securities analyst Robert Ohmes recently hosted a Harley-Davidson bull-bear debate after initiating coverage of the stock with a Buy rating and $73 price target.

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“Overall sentiment was mixed with bulls focused on signs that HOG’s new strategy under [its] new CEO is working after HOG reported significant 1Q EPS upside & first Q of U.S. retail sales growth since 4Q16, while bears focused on sustainability of demand trends (given potential benefit from model timing shift) & skepticism that demographics are not still a headwind for Harley,” Ohmes said Friday.

Harley Bull, Bear Takes: Ohmes listed five elements to the current Harley bull thesis:

• Near-term EPS upside from new model dealer restocking.
• Accelerating brand momentum.
• Positive dealer feedback on Harley’s Pan America 1250 launch.
• Long-term opportunity for motorcycle EBIT margins to recover to peak levels of above 15%.
• Long-term growth opportunities in Europe and other international markets.
• At the same time, Harley bears focused on the sustainability of current demand trends, given first-quarter U.S. sales were boosted by model year timing, and pent-up demand, as no new models had launched since August 2019.
• In addition, bears are skeptical Harley can overcome the long-term headwind of demographic shifts to a younger generation of customers.

Benzinga’s Take: One of Harley’s biggest problems in recent years is the company’s poor performance with younger consumers. It remains to be seen whether demand from that generation of buyers will pick up as they get older or Harley will continue to struggle to win them over.