Boomers Or Bust? Bernstein Downgrades Harley-Davidson As 'Potential Upside Is Now In The Rear View'

Analysts at Bernstein no longer hold a bullish view on Harley-Davidson Inc HOG given the belief that motorcycle demand in the United States is "in the throes of secular erosion."

Bernstein's David Beckel downgraded Harley-Davidson's stock from Outperform to Market Perform with a price target slashed from $62 to $55 as his bullish stance was based on upside from Milwaukee-Eight (M-8) and expectations of a President Trump-induced demand.

Secular Erosion

The overall demand for motorcycles are "far more severe than oil market weakness alone could justify," the analyst noted. This could be attributed to a demographic shift in which the Generation Y population (born in the 1980s and 1990s) are adopting motorcycles at a much lower rate than prior generations.

Meanwhile, Harley Davidson's most important group, the Baby Boomers, are exiting the rider pool due to their age. The Generation X population (born in the 1960s to 1970s) will be a prime target for Harley-Davidson in the coming years, but this generation "pales in comparison" to the size of its core Boomer market.

Milwaukee-Eight Demand

Becky's proprietary survey data found that demand for Harley-Davidson's M-8 bike hasn't materially improved over the years. This is notable as expectations were high for the bike to support sales and now the bike's poor performance "throws cold water on the belief that increasingly innovative product in the future will meaningfully reignite sales."

As such, any potential upside from catalysts are "now in the rear view mirror."

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