By Michael Elkins
Jefferies upgraded Harley-Davidson, Inc. (NYSE:HOG) to a Hold rating (from Underperform) as the motorcycle manufacturer’s stock reaches its $39 price target.
Analysts say that they see a more balanced risk/reward for the company. However, Jefferies’ view on fundamentals is unchanged as they remain cautious on retail demand stabilization amid a shaky macro backdrop and risks stemming from HDFS.
The company projects retail units flat to slightly up in 2023, as inventory availability improves. From a cadence perspective, -5-10% 1Q declines are expected to inflect positively in 2Q-3Q. Jefferies sees risk of meaningful positive inflection stemming from macro pressure, affordability, and competition from used product.
Analysts wrote in a note, “To see upside vs. current levels, we believe investors will need to see progress to the projected retail inflection (we est. FY guide implies improvement to ~MSD% growth 2Q/3Q up from -5-10% now expected in 1Q). Also, incremental confidence in banking sector (largely stemming from gov't intervention) and cooling of rate hikes would also be a positive. Earnings have skewed toward the positive from a stock catalyst standpoint, with positive reactions for the past 5 qtrs (avg. +7%). On the other hand, bears expecting incremental downside from here are playing for persisting/worsening retail trends, overshooting inventory build, intensifying promos, and material downside to HDFS projections ('23 EBIT guided -20-25% y/y). We see it as unlikely that our downside case ($21 PT) pans out prior to more meaningful progress through the retail season (barring major macro event).”
Shares of HOG are down 1.31% in afternoon trading on Wednesday.